The stock and bond markets’ performance to date for calendar year 2022 has seen a sizable pullback in the markets and left investors searching for when things may improve. Elevated inflation levels, a Federal Reserve aggressively raising interest rates, Russia’s invasion of Ukraine and energy market supply and demand uncertainty has left most investors feeling the market has delivered them a basket full of lemons.
However, all is not lost and there are opportunities in any market. I will highlight two separate interactions from the past few weeks with clients who have decided to implement financial planning strategies to turn market lemons in to long term lemonade.
The first client is a man named Rick who works at local plant and is in his late 30s. Rick has recently received a pay raise from his employer. Rick called to ask my thoughts on the market and if there’s anything he should be doing. Knowing that Rick is a diligent saver and is cash flow positive, I advised Rick to contribute an additional $500 per month over his current 401(k) contribution to take advantage of being able to purchase more investments in his 401(k) at reduced price levels. Who doesn’t like bargain shopping?
The second client is a woman named Leslie who is a recent retiree from the oil and gas industry in her mid-60s. Leslie was a high earner for most of her career and accumulated a substantial portfolio to sustain her retirement. Most of Leslie’s savings are in IRA accounts that will be subject to required distributions and income tax beginning at age 72. Leslie has delayed Social Security until age 70 to maximize her benefit. Leslie is concerned with income taxes in retirement related to the large required IRA distributions and how that will subject more of her Social Security benefits to income taxation as well as increase the cost of her Medicare premiums. Leslie and I discussed the value of a regimented Roth conversion to address all of her concerns. Leslie agreed and is in the process of implementing an annual Roth conversion regimen.
These are two recent, but stark examples of how sound financial planning, even in the midst of uncertain and down markets, can result in sweet success for your long term financial plans.
Published in the Victoria Advocate
Kyle W. Noack CPA/CFP® is a managing member of Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.