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Pension Payout Options

When you think of retirement, you probably envision the enjoyable ways you will spend your free time. But, you may also want to give some thought to receiving your funds while in retirement. If you participate in a company pension plan, you will have to decide how you want to receive your pension proceeds. Consider … Read more

How to Minimize Taxes During Market Downturns

 Market downturns, like the one through the first half of 2022, could be a good time to adjust your fund portfolio to minimize the tax bite. Here’s how to calculate the best ways to do that – now and in the future.  Taxable accounts you hold longer than a year incur long-term capital gains taxes … Read more

Don’t Get Rid of Dividend-Paying Stocks Just Yet

  “Money makes money. And the money that money makes, makes money.”  Since the beginning of the year, economists and pundits seem united in the belief that economic growth will continue to contract, propelling inflation and interest rates to levels that we haven’t seen in years. When the Federal Reserve lifts the fed funds rate … Read more

What Should You Do as Markets Flirt with Bears?

The standard definition of a bear market is when major U.S. stock indices, such as the S&P 500, drop by 20% or more from their peak. And 5+ months into 2022, we see NASDAQ and the smaller-cap Russell 2000 both in the grips of a bear and the DJIA and S&P 500 darting just outside … Read more

Managing Bond Risks When Interest Rates Rise

After dropping the benchmark federal funds rate to a rock-bottom range of 0%–0.25% early in the pandemic, the Federal Open Market Committee has begun raising the rate toward more typical historical levels in response to high inflation. At its March 2022 meeting, the Committee raised the funds rate to 0.25%–0.50% and projected the equivalent of … Read more

There’s Still Time to Contribute to an IRA for 2021

Making a last-minute contribution to an IRA may help you reduce your 2021 tax bill. If you qualify, your traditional IRA contribution may be tax deductible. And if you had low to moderate income and meet eligibility requirements, you may also be able to claim the Saver’s Credit for 2021 based on your contributions to … Read more

What is the Fed Taper?

What is the Fed Taper? An economist explains how the Federal Reserve withdraws stimulus from the economy

Tapering refers to the Federal Reserve policy of unwinding the massive purchases of Treasury bonds and mortgage-backed securities it’s been making to shore up the economy during the pandemic. 

The unconventional monetary policy of buying assets is commonly known as quantitative easing. The Fed first adopted this policy during the 2008 financial crisis. 

Normally, when a central bank wants to reduce the cost of borrowing for companies and consumers, it lowers its target short-term interest rate. But with its target rate at zero during the 2008 crisis – at the same time that there was no inflation and the economy was still hurting – the Fed was no longer able to cut rates further. And so the Fed turned to quantitative easing as a way to continue to reduce borrowing costs. When the government buys assets, their prices go up, which lowers their yield or interest rate. 

 The Fed again adopted this policy in March 2020 after the COVID-19 pandemic resulted in a national lockdown. By November 2021, the Fed had bought over US$4 trillion worth of Treasurys and other securities. 

The U.S. central bank began tapering in November 2021, scaling back total purchases by $15 billion a month, from $120 billion to $105 billion. 

The Fed decided to double the pace at which it tapers on Dec. 15. Rather than $15 billion, the Fed will reduce purchases by $30 billion every month. At that pace it will no longer be purchasing new assets by early 2022. 

What is Fed taper chart

Why it matters 

Growing concerns among economists that rising inflation could harm the economy are likely a big part of what led the Fed to begin tapering. 

Inflation is the rate of change in the price of goods and services. The Consumer Price Index, which includes several categories of everyday items that a typical American might buy, is the measure of inflation most often reported in the media. In November 2021, it was up 6.8% from a year earlier. 

By any measure, inflation is above the Fed’s target of 2%. By tapering asset purchases, the Fed may help reduce inflation – or at least slow its rise – because it is withdrawing some of the monetary stimulus that is fueling economic growth. 

The reason the Fed has decided to accelerate the process is likely because it now believes inflation may be less transitory than it had hoped, at the same time that the labor market appears strong. 

What this means for you 

Americans have enjoyed rock-bottom interest rates for the better part of the past 13 years, helping to make it cheaper to borrow money to buy cars and homes and start businesses. 

Consumers and companies are already beginning to see slightly higher rates on mortgages, business loans and other types of borrowing. 

In other words, the era of cheap money may finally be coming to an end. Enjoy it while it lasts. 

Ballast Advisors is a fee-based financial planning firm.  Our financial advisors serving the Twin Cities and Southwestern Florida can help you reach your retirement and financial goals.  Our offices are located in Woodbury, MN, Arden Hills, MN and Punta Gorda, FL.


This is an updated version of an article originally published on Nov. 3, 2021. Copyright © 2022 RSW Publishing. All rights reserved. Distributed by Financial Media Exchange. RSW Publishing has an agreement to republish this author’s content. This article was originally published on The Conversation 

Author:

Edouard Wemy Assistant Professor of Economics, Clark University

Paul Slovic Professor of Psychology, University of Oregon

Disclosure statement Edouard Wemy does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Partners: Clark University provides funding as a member of The Conversation US.

Republish our articles for free, online or in print, under our Creative Commons license.

 

 

The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request. BAL-22-02.

Data Privacy and Your Financial Planner

              Data Privacy and Your Financial Planner Data privacy week is January 24 – 28, 2022.  Here are some tips to help investors safeguard  personal information when it comes to working with a financial advisor. 2021 was a record year for the number of data breaches publicly reported, according … Read more

2022 Key Numbers

A popular tool, the 2022 Key Numbers document is a comprehensive list of tax bracket and deductions information to assist you as you consider your financial plan for the year. It contains the relevant numbers for:

Individual Income Tax Planning: Alternative Minimum Tax (AMT), Charitable deductions, Child tax credit, Classroom expenses of elementary and secondary school teachers, Earned income tax credit (EITC), Expatriation, Foreign earned income, Itemized deductions, Kiddie tax, Medicare tax (additional payroll tax and unearned income contribution tax), Nanny tax, Personal exemption amount, “Saver’s Credit,” Standard deductions, Standard mileage rates, 2022 Federal Income Tax Rate Schedules (Individuals, Trusts, and Estates), 2021 Federal Income Tax Rate Schedules (Individuals, Trusts, and Estates), Adoption Assistance Programs

Business Planning: Earnings subject to FICA taxes (taxable wage base), Health insurance deduction for self-employed, Qualified transportation fringe benefits, Section 179 expensing, Small business tax credit for providing health-care coverage, Standard mileage rate (per mile), Special additional first-year depreciation allowance

Education Planning: American Opportunity and Lifetime Learning Credits, Coverdell education savings accounts, Deduction for qualified higher education expenses, Deduction for student loan interest, Gift tax exclusion, Kiddie tax, U.S. savings bonds interest exclusion for college expenses;

Protection Planning: Eligible long-term care premium deduction limits, Per diem limit, Archer Medical Savings Accounts, Flexible spending account (FSA) for health care, Health Savings Accounts (HSAs)

Estate Planning: 2021 and 2022 gift and estate tax rate schedule

Government Benefits:Social Security, Medicare, Medicaid

Retirement Planning: Employee/individual contribution limits, Employer contribution/benefit limits, Compensation limits/thresholds

Investment Planning: Maximum tax on long-term capital gains and qualified dividends, Unearned income Medicare contribution tax (“net investment income tax”)

 

See More Free Tools

Ballast Advisors is a fee-based financial planning firm.  Our financial advisors serving the Twin Cities and Southwestern Florida can help you reach your retirement and financial goals.  Our offices are located in Woodbury, MN, Arden Hills, MN and Punta Gorda, FL.

IMPORTANT DISCLOSURES The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request

2021 Year-End Tax Tips

Here are some things to consider as you weigh potential tax moves between now and the end of the year.

1. Defer income to next year

Consider opportunities to defer income to 2022, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions

You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2022) could make a difference on your 2021 return.

3. Make deductible charitable contributions

If you itemize deductions on your federal income tax return, you can generally deduct charitable contributions, but the deduction is limited to 60%, 30%, or 20% of your adjusted gross income (AGI), depending on the type of property you give and the type of organization to which you contribute. (Excess amounts can be carried over for up to five years.)

For 2021 charitable gifts, the normal rules have been enhanced: The limit is increased to 100% of AGI for direct cash gifts to public charities. And even if you don’t itemize deductions, you can receive a $300 charitable deduction ($600 for joint returns) for direct cash gifts to public charities (in addition to the standard deduction).

4. Bump up withholding to cover a tax shortfall

If it looks as though you will owe federal income tax for the year, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall. There may not be much time for employees to request a Form W-4 change and for their employers to implement it in time for 2021. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can be used to make up for low or missing quarterly estimated tax payments.

5. Maximize retirement savings

Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2021 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so. For 2021, you can contribute up to $19,500 to a 401(k) plan($26,000 if you’re age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you’re age 50 or older).* The window to make 2021 contributions to an employer plan generally closes at the end of the year, while you have until April 15, 2022, to make 2021 IRA contributions.

*Roth contributions are not deductible, but Roth qualified distributions are not taxable.

6. Take required minimum distributions

While required minimum distributions (RMDs) were waived for 2020, they are back for 2021. If you are age 72 or older, you’re generally required to take RMDs from traditional IRAs and employer-sponsored retirement plans (special rules apply if you’re still working and participating in your employer’s retirement plan). You have to make the withdrawals by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of the amount that wasn’t distributed on time.

7. Weigh year-end investment moves

You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021

IMPORTANT DISCLOSURES

The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request.