Highlights of this Special Edition Newsletter:
LVM’s Year-End Financial Planning Checklist
The Presidential Cycle, Congressional Make-up,
and Stock Market Trends: A Historical Perspective
Spring Storm Update
Supporting Our Community: Kalamazoo Concert Band
LVM's Year-End Financial Planning Checklist
Required Minimum Distributions (RMDs)
Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually, starting with the year that he or she reaches the age of 73. The RMD is calculated for each IRA or retirement plan account by dividing the prior December 31 balance by a life expectancy factor that the IRS publishes. LVM and most custodians encourage you to complete these distributions before December 1 to ensure distributions are made before year-end. Qualified Charitable Distributions (QCDs)
IRA owners over the age 70 ½ are allowed to satisfy all or a portion (up to $105,000) of their RMD with a direct transfer to a qualified charity. Unlike regular IRA withdrawals, QCDs are excluded from your taxable income, which can lower overall taxes paid and may help you keep certain tax credits. Managing your tax bracket may also help reduce future Medicare premiums. The December 1 distribution timeline also applies for QCDs. If you are writing checks directly from the IRA, they must clear before year end.
Maximize Retirement Contributions
In 2024, you can contribute $23,000 to your 401k or other employer-sponsored retirement plan. An extra $7,500 in “catch-up” contributions are allowed if you will be at least age 50 this year.
Even if you do not have an employer-sponsored plan, you may still be able to contribute up to $7,000 ($8,000 if you’re 50 or older) to a traditional IRA. These rules also apply to non-deductible IRA and Roth IRA contributions. “Backdoor” Roth contributions are also available for higher income earners if you are phased out from making direct contributions to a Roth IRA.
Defined contribution plans allow higher contributions of up to $69,000 or 25% of your qualified income (whichever is less).
Tax-Loss Harvesting
Tax-loss harvesting is a strategy used to reduce overall capital gains taxes paid by selling securities you hold at a loss. Tax losses can be used to offset gains you may have in the account or gains from selling real estate or a business. Annually, you can use $3,000 of capital losses to offset income, and you can carry forward any losses above and beyond the $3,000 for future use.
Other Items to Discuss with your Financial Advisor
College education savings (contributions to 529 plans); Health Savings Account (HSA) contributions ($4,150 per person plus $1,000 for 55 and older “catch-up” provision); making gift-tax exclusion gifts to non-charitable recipients (children, grandchildren, other family or friends) of up to $18,000/recipient ($36,000/recipient from a couple); review life insurance coverage and estate planning documents including Trusts, Wills, Health Care Proxy, and Financial Power of Attorney.
The Presidential Cycle, Congressional Make-up,
and Stock Market Trends: A Historical Perspective
Since 1928, the third year of the presidential cycle has proven to be a significant period for investors, with the S&P 500 generating positive returns 78% of the time. On average, this third year boasts impressive returns of 13.5%, compared to the all-year average of 7.7%. This trend suggests that, while midterm elections often bring challenges for the incumbent president’s party, the broader implications may extend beyond presidential politics to the congressional cycle.
Historically, the second year of a president’s term has not been as favorable for investors. It has accounted for more than one-third of the S&P 500’s total negative return years since 1928. This period has seen an even higher incidence of materially negative returns—defined as those with performance worse than -10%—highlighting the volatility that often accompanies this phase of the cycle.
A key feature of these trends is the rebound pattern from bearish second years to bullish third years. In fact, only eight instances of two consecutive down years have occurred since 1928. Remarkably, the only time this pattern unfolded from the second to the third year was during the Great Depression, specifically in 1930 and 1931.
Beyond the presidential cycle, congressional control also plays a significant role in stock market performance. From 1953 through December 2023, when Republicans control both houses of Congress, the stock market has averaged annualized returns of 17.3%, regardless of which party holds the presidency. In contrast, when Democrats control both houses, the average annualized returns drop to 9.9%. When Congress is split, the stock market has averaged annualized returns of 13.5%, highlighting the nuanced impact of political dynamics on market performance. While it hasn’t held true so far this year, volatility typically increases every month until the election. Following the conclusion of the election, volatility reverts back to the lower summer levels.
As investors navigate the complexities of the market, understanding these historical patterns within the presidential and congressional cycles can offer valuable insights. While the second year may bring challenges, the historical resilience of the third year—and the influence of congressional control—provides a hopeful outlook for market performance moving forward.
Spring Storm Update
After the devastating storms and tornado that hit Portage earlier this year, LVM has been busy planting new trees to replace those that were lost. This small tricolor beech at our LVM office entrance will provide a colorful and inviting welcome!
Supporting Our Community: Kalamazoo Concert Band
LVM is a proud supporter of the Kalamazoo Concert Band's 2024-2025 season! Most concerts are free, and we encourage you to attend. Their holiday concert on December 6 in Miller Auditorium—titled “It’s the Best Time of the Year,” with special guest artist Megan Dooley—is a ticketed event. If you would like a free ticket, please contact LVM at 269.321.8120. Tickets are first come, first served, so let us know as soon as possible!
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