January 2019 Newsletter
January 2019
Market Update
The equity markets were certainly headlining news for much of 2018, with a strong start to the year that pushed equities to new highs throughout the spring and summer, followed by startling declines in the 4th quarter. For 2018, the Dow was down 5.6%, S&P 500 was off 6.2%, the Nasdaq lost 3.9% and the Russell declined 11.01%. While the US markets struggled, things weren’t any better in the international markets as the FTSE all-world index declined 12%.
Fixed income finished the year essentially where it started, with the Barclays Aggregate finishing flat (up .01%). That is not to say that the debt market did not have many newsworthy events throughout the year. The Federal Reserve raised interest rates a total of 4 times in 2018, taking the rate to (2.25 – 2.5%). While the interest rate increases are interesting, the President’s opinion of these rate hikes has gathered far more attention. Increasing interest rates is good in the long run for fixed income investors; however, the increase likely put pressure on equity markets as investors may have traded equity gains for fixed income yield. The 10-year treasury finished the year with a yield of 2.68%, though it did reach a high of 3.23% in November.
2019 is off to a good start, which is reassuring as 2018 ended with worst December since the Great Depression. The Q4 weakness has many concerned about a recession but in our view, the data doesn’t support these concerns. We acknowledge further weakness is a possibility, but don’t anticipate that as the most likely scenario. While the worst hopefully has passed, it’s also not likely to be smooth sailing for equity markets. A good amount of harm was done throughout Q4 of last year, and it will take some time to repair the damage.
With that said, we do see potential tailwinds. In the near term, a resolution of the government shutdown could provide a temporary boost to equity markets and, looking forward a bit further, a potential long-term solution to the trade war with China would also serve as a catalyst for growth. At the end of the day, though, performance will likely rely—as it most often does—most heavily on GDP growth and corporate earnings.
While 2018 saw a pullback in the equity markets, it’s important to keep your investment time horizons and goals in mind rather than react to the short-term market performance. As always, we welcome all of your questions; please do not hesitate to call or email us with any you might have regarding the markets or your investments.
Best,
Nathan
President, Kuhn Wealth Management
Increase in Contribution Limits for 401(k), IRA, and More in 2019
The IRS recently announced new inflation-adjusted figures for 2019 and there are a lot of changes to help you save more in the new year.
401(k) Contribution Limit
In 2019, the contribution limit for 401(k)s, 403(b)s, a multitude of 457 plans, as well as the federal government’s Thrift Savings Plan will all increase from the 2018 limit of $18,500 to $19,000. The catch-up contribution for those over 50 will stay the same at $6,000, bringing the total that those over 50 can contribute to these kinds of plans to $25,000.
To Increase contributions to your employer-sponsored plan, you will need to follow your employers’ plans procedures. If your employer plan is a 403B or 401(K) that we manage, do not hesitate to reach out and we can help facilitate the change.
IRA Contribution Limit
The contribution limit for IRAs has increased in 2019 from $5,500 to $6,000. The IRA catch up contribution will remain the same at $1,000 for those of age 50 and over.
If you have an IRA or Roth IRA with our firm and would like to increase your monthly contributions, please reach out to our office and we can make those changes for you.
Adjustments to IRA income limits
Changes were also made to taxpayer deductions. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated, depending on filing status and income. (Note: if neither the taxpayer nor their spouse has retirement plan coverage through their employer, the phase-out of the deduction do not apply.)
The new phase-out ranges for IRAs in 2019 are:
Single taxpayers covered by workplace retirement plans have a phase-out range of $64,000 to $74,000 (up from $63,000 to $73,000).
Married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000 (up from $101,000 to $121,000).
For an IRA contributor who is not covered by a workplace retirement plan that is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000 (up from $189,000 to $199,000).
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains the same at $0 to $10,000.
Roth IRA Income Limits
After-tax Roth IRA contributions can allow workers to qualify for tax-free investment growth and withdrawals in retirement. Participants can earn $2,000 more (or $4,000 for couples) in 2019 while remaining eligible to contribute to their Roth IRA.
Those who earn more than $137,000 individually (or $203,000 as a couple) won’t be able to directly contribute to a Roth IRA in 2019. For workers that earn more than $122,000 individually and $193,000 as married couples, the ability to make Roth IRA contributions is phased out.
The phase-out ranges for Roth IRAs in 2019 are as follows:
For taxpayers making contributions to Roth IRAs, the income phase-out range is $122,000 to $137,000 for singles and heads of households (up from $120,000 to $135,000).
For married couples filing jointly, the income phase-out range is $193,000 to $203,000 (up from $189,000 to $199,000).
For a married individual who makes contributions to a Roth IRA that is filing a separate return is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Now is a good time to evaluate your retirement contributions. If you would like to make adjustments to your contributions, please contact us. Additionally, if you are making Roth IRA contributions and your income is near or exceeding the income limits, please contact our office so we can further discuss your situation.
Bitcoin: An Update
Disclaimer: This information is NOT a suggestion to buy or not buy Bitcoin.
Last year, as Bitcoin began to gain more widespread recognition in mainstream markets, we provided an overview of the Bitcoin and cryptocurrencies. At the time, we discussed both advantages and challenges, along with caution if you decide to purchase any Bitcoin.
In the months since we published this article, Bitcoin continued to exhibit volatile behavior. After plunging over 80% in 2018, the number of Bitcoin in circulation amounted to over 17 million and, as of the date of this writing, the bitcoin-to-dollar pair is trading just over $4,000. In the first half of 2018, nearly a billion dollars were stolen by hackers from exchanges. In August, the Securities and Exchange Commission (SEC) rejected the bitcoin ETF. Yet, despite the volatility and bad news, it seems as though Bitcoin remains an intriguing topic for many.
In 2018, large banks established cryptocurrency desks, signaling that they are attempting to understand and potentially integrate Bitcoin with their systems. In addition, some large companies such as Microsoft and Starbucks are exploring the option to let customers pay with Bitcoin. And the provider VanEck is the latest company to submit to the SEC for an official ETF in 2019 which, if approved, would not only increase Bitcoin availability to investors but also increase regulatory oversight, thus potentially easing some fears.
So do we have a prediction for Bitcoin in 2019? Only that there will be more fluctuation and volatility. For anyone who bought coins at $100 in 2013, they have seen a return that is unlikely for most in their lifetime. For those that have purchased in the last one to two years, they are likely hoping that Bitcoin pricing changes course and gets back to an upward trend. As for us, we still do not have any plans to purchase Bitcoin or any other cryptocurrency… but we will be watching to see what happens.
The New Year Looks Different for Kuhn Wealth
2018 brought a lot of exciting changes for us at Kuhn Wealth Management, both professionally and personally. Some highlights include:
Kuhn Wealth Management
We are grateful to you for another great year. Our firm continues to grow and we appreciate your business and every referral you send our way. Our commitment is to provide you with personalized service and unbiased advice as we work together toward achieving your financial goals. We’re looking forward to what we can accomplish together in 2019.
Chicagoland 1031 Exchange
This past fall, we launched a website dedicated to our 1031 exchange services, chicagoland1031exchange.com. Completing a 1031 exchange has a lot of moving parts and our goal is to make sure the process is straightforward and clear for our clients. Our new, dedicated website provides us with a platform to reach investors with 1031 investments to more directly speak to their needs and questions.
We also just launched a Facebook page for Chicagoland 1031 Exchange; please follow us if you are interested or even simply curious.
New Babies
We’re thrilled to welcome some new babies into our office family this year. Karla and her husband Ryan welcomed daughter Riley on July 30. Matt and his wife Danielle welcomed daughter Mackenzie Jo on December 2. Please join us in congratulating them!
And while Nate and Sara don’t have any baby news to share, you can see their kids may be following in Nate’s footsteps!
As of 1/15/2019. The opinions expressed are those of the writer and does not necessarily represent the views of the presenting party, nor their affiliates. Past performance and predictions are not a guarantee of future results. The material contained hearin is obtained from sources believed to be reliable, but its authenticity, accuracy or completeness is not guaranteed. Projections are inherently limited and should not be relied upon as an indicator of future results. Investments in securities involve a high degree of risk and should only be considered by investors who can withstand the loss of their investment. The Dow Jones U.S. Micro-Cap Total Stock Market Index is a float-adjusted, market capitalization-weighted index of all stocks below the 2,500st rank by market capitalization of the Dow Jones U.S. Total Stock Market Index. The NASDAQ Composite Index is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market. The Russell 1000® Index is a capitalization-weighted index that measures the performance of the 1,000 largest stocks by market capitalization in the Russell 3000® Index, an index of the top 3,000 U.S. stocks by market capitalization covering 98% of the U.S. equity investable universe. The FTSE All World Index is the Large/Mid Cap aggregate of 2700 stocks from the FTSE Global Equity Index Series covering 90-95 percent of the investable market capitalization. Direct investment in an index is not possible. Because investor’s situations and objectives vary, this information is not intended to indicate direct investment advice and suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.
Securities offered through Concorde Investment Services, LLC (CIS), Member FINRA/SIPC. Advisory services offered through Kuhn Wealth Management, Inc., a state registered investment advisor. Kuhn Wealth Management, Inc. is independent of CIS and Concorde Asset Management, LLC, all of whom are unaffiliated with third party sites, and cannot verify the accuracy of nor assume responsibility for any content of linked third party sites. Information available on third-party sites is for informational purposes only.