Wealth Management
Millions of Americans are reliant on the social security payments as they shift into retirement, and while SSA boosted the amount in checks by 5.9% it pales in comparison to the record CPI numbers. The CPI climbed at a jaw-dropping 6.8% in November, which skims a healthy amount from the bottom line. Another large factor eating at people’s retirement social security is Medicare Part B premiums and are cost-of-living reducer. Medicare Part B premiums will subtract 29% percentage points from the Social security Take home over the next 30-years. Finally, retirees should be wary that their prescriptions are covered by Medicare because otherwise, they will be a hefty retirement expense.
FINSUM: It’s outrageous that social security and other retirement accounts aren’t keeping pace with the actual costs of retirees, and needs to factor into investment decisions.
The 2019 Secure Act paved the way for types of assets to be added into 401(k) plans by limiting the legal liability of partners. Since then it’s been a series of new companies announcing the addition of annuities to retirement plans. However, this is a huge chunk of money in the form of a deferred income that advisors won’t necessarily be managing. A growing number of advisory firms are concerned as large amounts of traditional investment being managed by advisors will now be tied up in annuity contracts. A peek behind who the major lobbyist for 2019 secure reveals its mainly insurance companies limiting their liability and existing retirement vehicle supporters like Fidelity. Finally, this could be bad for clients as many institutional investors can get better deals on annuity prices for their clients.
FINSUM: While the care act will undoubtedly affect annuity demand, it could adversely affect advisors in their client’s retirement future.
There were lots of large transitions in the financial advisor community this year, but these were some of the biggest splashes in 2021. In August Dane Runia, transitioned his $3.2 billion dollar team from Merrill Lynch to Morgan Stanley. This wasn’t the only transition from Merrill this year as just a couple of months prior RBC moved in one of Merrill’s teams that were in control of over $2 billion. However, it was Merrill Lynch’s April deal with the biggest tagline of the year snagging an advisor of $17 billion from Citi Private Bank. Wells Fargo has been desperately kicking its recruiting into high gear as they lost $7 billion after they stopped serving international wealth management clients. Finally, UBS made a splash as they stole $10.5 billion teams from J.P.Morgan.
FINSUM: These were some of the most high-profile deals this year, but 2022 could be just as wild in the advisor transitioning world.
More...
The deadline is approaching for many investors to capitalize on tax strategies to minimize their bills moving forward. The most important thing investors can do is capitalize before the end of the year and claim losses they have. Special deductions are given to those with losers outpacing winners, up to $3000. However, investors should be wary of wash rules that may penalize them for repurchases within a 30-day period. The other most important strategy is to actually pay off excess medical expenses. Special provisions will mitigate your tax losses if they reach a certain portion of your income. Deferring income could also be a way out but it could be a risky strategy because next year could be even better than 2021.
FINSUM: Now is the time to capitalize on bond market blues and sell off those useless-yieldless tickets to save on the tax bill.
There have been widespread attempts by the new administration and private financial companies to expand the access to retirement vehicles, but a ‘fiduciary only’ regulation will kill retirement hopes for many low-income communities. Nearly half of black families and almost two-thirds of Hispanic families have no retirement savings account, and a stricter fiduciary rule would make it virtually impossible for these communities to get access to financial securities like annuities which allow them access to guaranteed lifetime income. Previous strict fiduciary rules like in 2016 left 10 million small retirement account owners without financial advisor access and a new rule could have a similar impact. Regulators and public officials should look into alternative approaches if they are interested in building retirement savings in underserved communities.
FINSUM: Unintended consequences of policies most often impact those the policies are seeking to help!
Joe Manchin, Democratic Senator from West Virginia, made a splash last week when he pulled his support for the build back better citing a number of problems that keep him from backing the bill. However, this week Manchin did a 180 on the billionaire tax saying he would be willing to support it in a revised version of the bill. Manchin’s version of the bill includes many of the same spending appropriations such as pre-k care, climate change, and Obamacare, but omitted certain pieces like the child tax credit. Manchin’s vote is critical if Biden hopes to pass the bill, but with rising inflation, labor shortages, and spiking national debt, he’s still reluctant to throw his weight behind Biden’s bill.
FINSUM: Remember the House’s version of the bill didn’t include a billionaire tax, even if Manchin puts it back on the table it’s unlikely the final bill will include it.