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Apr 29
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Mitch Zacks – Weekly Market Commentary: Categorizing A Market Selloff Can Help You Navigate It

By Weekly Market Commentary

Categorizing a Market Selloff Can Help You Navigate It

Market declines come in all shapes and sizes, but they tend to follow similar patterns over time. Corrections are short, sharp declines between -10% and -20%, while bear markets are declines greater than 20% that fall into one of three categories1:

·     Structural – These bear markets are caused by severe dislocations, typically in financial markets, and are often associated with ‘bubbles.’ The 2008 Global Financial Crisis is an example of a structural bear, which often take several years to fully recover from.

·     Cyclical – These bear markets are more closely tied to the business cycle, and often coincide with a peak in profit margins, rising interest rates, elevated inflation, and/or a deceleration in economic growth.

·     Event-Driven – Event-driven bear markets are triggered by an extraneous, usually unexpected shock. The Covid-19 pandemic is a perfect example of an event-driven bear market, as investors quickly anticipate immediate and elevated risks to earnings and growth.

In terms of magnitude and duration, structural bear markets tend to be the most painful. They’ve averaged about -37% declines over approximately 42 months. Cyclical and event-driven bear markets, on the other hand, average about -30% declines over generally shorter periods. Cyclical bears have lasted 25 months on average, while event-driven bears have usually spanned about 8 months with an average drawdown of -29%.

In my view, the current environment has the markings of a correction or an event-driven bear market.

The stock market appears to be very quickly pricing-in uncertainty tied to tariffs and other political factors, which has led to multiple contractions even as earnings have, to date, held up reasonably well. I’m not seeing any signs of a bubble bursting or a crisis in financial markets, which I think easily rules out a structural bear. A cyclical bear market does not seem likely either, as interest rates and inflation peaked some time ago and earnings expectations for 2025 were nicely positive throughout Q1. Higher-than-expected tariff pronouncements—with all the accompanying uncertainty—have been the wild card, which I think puts this downdraft in the event-driven category.

As seen in the table below, event-driven bear markets can sometimes have the look and feel of corrections, given the very short time frame where downside volatility is experienced. Once the downdraft is over, the forward returns are unanimously positive.

Bear Markets and Recoveries, 1929 – Present

It makes sense why the recovery from event-driven downdrafts is often quick. In many cases, the global/U.S. economy is in decent or good shape before an exogenous event takes place, meaning that it does not take quite as long for the economy to recover once the impact of the ‘event’ fades. In the current environment, if trade uncertainty suddenly fades it would be easy to envision the market taking off in response. U.S. household and corporate balance sheets are strong, the jobs market remains in strong overall shape, and credit spreads are tight. Investment-grade corporations still have relatively easy access to capital markets, and banks are also very well capitalized. This calls for patience, in my view.

Bottom Line for Investors

There is no way to know when the market will bottom. But what I can tell you, from a long reading of history, is that a sustained market rally will almost certainly take hold as the news remains bad and even gets worse. In other words, don’t wait for the breakthrough in trade.

The goal now is to ensure you’re positioned to participate in the rebound when it occurs. If this is a correction or an event-driven bear market, which I believe it is, that rebound could arrive much sooner than many anticipate.

1 Goldman Sachs. Asset Management. 2025.

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties.  Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P Mid Cap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Apr 22
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Mitch Zacks – Weekly Market Commentary: U.S. Treasurys React to “Liberation Day”

By Weekly Market Commentary

The Bond Markets Make a Tariff Statement

Given the flurry of tariff announcements (which are still ongoing) and elevated equity market volatility, investors may have understandably taken their eye off the U.S. bond markets. But there’s been action in U.S. Treasurys that is worth a closer look.

In the immediate days following President Trump’s April 2nd “Liberation Day” tariff announcement, Treasury bonds behaved as we’d expect them to. As stocks sold off sharply, investors poured into “risk-free” Treasury bonds, which sent bond prices higher and yields lower.1

But then something interesting happened.

Starting on April 4th, Treasury bonds endured sustained selling pressure (with prices falling and yields rising) as stocks also fell, which added another layer of confusion to an already uncertain market environment. Given the U.S. Treasurys’ status as the world’s safe-haven asset during periods of global economic and market upheaval, one would have expected bond prices to rise as stocks fell. But the opposite started occurring. Investors were dumping Treasurys and stocks at the same time, with the 10-year Treasury yield notably jumping from 4.20% to over 4.50% within a four-day stretch. That marked its steepest increase since the 2008 financial crisis.

10-Year U.S. Treasury Bond Yields Spiked in the Wake of “Liberation Day”

One possible explanation for the sharp move in Treasury yields is rising inflation expectations. Treasurys are caught in a tug-of-war between growing recession fears (which would send yields lower) and the possibility of higher inflation due to tariffs (which would send yields higher). Perhaps inflation concerns were winning the day.

Another explanation is more technical. Institutional investors unwound complex leveraged trades en masse, such as basis trades, which rely on small price discrepancies between Treasury instruments. As yields spiked, these trades became unprofitable, forcing hedge funds to liquidate positions rapidly—which intensified the upside volatility.

The U.S. dollar also deserves a mention here. The dollar has long been the dominant reserve currency worldwide. The greenback is widely used by governments and institutions to stabilize their own currencies, manage trade flows, service debt, and prepare for unexpected economic shocks. And because global commerce is so often conducted in dollars, there’s a persistent demand to hold them—typically parked in U.S. Treasurys. In this sense, ongoing demand for U.S. dollars and Treasurys keeps yields in check.

There’s an argument that evolving trade dynamics are prompting some investors to re-evaluate the dollar’s centrality in global transactions. Central banks and sovereign investors aren’t pulling back per se, but they appear slightly more cautious when it comes to increasing their U.S. Treasury holdings. This could put upward pressure on yields over time.

Whatever the ultimate reason for the surge in 10-year Treasury bond yields, the message was clear: financial markets were not responding well to the proposed global order on trade.

Then came the 90-day pause, after which the stock market delivered one of its largest single-day rallies in history. In hitting the pause button, the worst-case scenario was taken off the table, and stocks surged. As I wrote in a Mitch on the Markets column two weeks ago, “[good news] will almost certainly trigger strong moves higher, [and] long-term investors simply cannot afford to miss these upswings.”

This brings me to a final point I’d like to make about market volatility, which is a point I’ve made many times before: remember that volatility works both ways. The very best days in the stock market often occur in close proximity to the worst days, often by less than a week. It’s basically impossible, in my view, to time the market so you only participate in the up days but avoid the down days.

The chart below zooms out and looks at the relationship between a surge in volatility and forward market returns. As readers can see, the previous instances when volatility reached extremes occurred in 2008 and in 2020. In both instances, stocks (as measured by the Russell 1000 Index) posted double-digit gains in the following six months.

Bottom Line for Investors

The recent spike in Treasury yields and unusual cross-asset selling are signs that markets are grappling with a complex mix of policy uncertainty, shifting inflation expectations, and evolving global trade dynamics. Investors should expect heightened volatility to continue in the near term, as trade policy is negotiated and news updates hit the tape.

But it’s important to remember that volatility—especially in response to political or policy-driven events—works both ways, and we have already seen how major moves in the market can prompt the administration to step-in with actions to de-escalate. There is still plenty left to learn on tariff and trade policy—but at least for now, the direction of travel appears to be away from the most punitive starting point.

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties.  Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P Mid Cap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Apr 16
Love0

It’s Financial Literacy Month. How Much Do You Know About Retirement Accounts?

By Retirement Planning

April is often known for spring cleaning, Easter, and Passover, but it’s also Financial Literacy Month. At its core, financial literacy refers to understanding and effectively being able to use various financial tools and strategies. So, in honor of the month, we’re offering a basic financial primer, with some quick definitions and simple breakdowns of common retirement accounts.

Background: The Decline of Pensions

During the rise of the industrial age, as workers migrated and began working for factories and other enterprises, they shifted away from farming and self-sufficiency and began relying on pensions to fund their retirement. Because these pension plans were managed by their employers who tended to take care of and provide for their loyal employees, workers were little involved in strategies or decision-making when it came to planning for their own retirements.

But times have changed. The first implementation of the 401(k) plan was in 1978, and since then, has gradually supplanted the pension for most American workers. According to a congressional report, between 1975 and 2019, the number of people actively participating in private-sector pension plans dwindled from 27 million to fewer than 13 million, although public employees sometimes still have them.

Today, most workers are responsible for funding their own retirement, which makes understanding and participating in retirement accounts vital.

401(k) Plans

A 401(k) is an employer-sponsored retirement savings plan. With the traditional 401(k), employees can contribute pre-tax income into their own account, selecting among the plan’s list of options which funds they want their money invested in. Many employers will even match employee contributions up to a certain percentage.

(NOTE: In the public sector, there are 403(b)s, 457s, the TSPs (Thrift Savings Plan), and many other retirement plans which work similarly to the 401(k), but may have slightly different rules.)

With a traditional pre-tax 401(k), the employee’s contributions can reduce their taxable income for the year, since the money is deducted from their paycheck. Once an employee reaches age 59-1/2, per the IRS they can start taking withdrawals without incurring penalties, depending on their employer’s 401(k) plan rules. In retirement, they must begin taking withdrawals every year beginning at age 73, and pay taxes on the money withdrawn. (These are called required minimum distributions, or RMDs.)

Some employers also offer a Roth 401(k) option, which uses after-tax dollars. Although you must pay income taxes on the money you put into a Roth 401(k), including any employer Roth account matching amounts, a Roth option offers tax-free withdrawals in retirement as long as the account has been in place for five years or longer, no RMDs, and no taxes to your beneficiaries or heirs.

While the 401(k) can be a great way to save, it’s important to be mindful of how much you’re contributing, how your funds are invested, and what the tax ramifications of your decisions are.

Social Security

Social Security is a part of many Americans’ retirement planning. It was created as a national old-age pension system funded by employer and employee contributions, although later it was expanded to cover minor children, widows, and people with disabilities.

Established in 1935, Social Security payments started for workers when they reached age 65—but keep in mind at that time, the average longevity for Americans was age 60 for men and age 64 for women. With people living much longer, sometimes spending as long as 20 or 30 years in retirement, today Social Security must be supplemented with your own personal savings and other retirement accounts.

IRAs

Individual Retirement Accounts (IRAs) were created in the 1980s as a way for those without pensions or workplace retirement plans to save money for themselves for retirement in a tax-advantaged manner. While the tax treatment and contribution limits vary, the goal is to provide you with the means to build a retirement nest egg that can grow over time.

Types of IRAs:

  • Traditional IRA: Allows for tax deductible contributions for some people, depending on their income level and whether they have a plan through their workplace. Any growth in a traditional IRA is tax-deferred, and you’ll pay taxes when you withdraw the money in retirement. Contributions are subject to annual limits, and penalties apply if funds are withdrawn before age 59 ½, with some exceptions. RMDs must be taken annually beginning at age 73 and ordinary income taxes are due on withdrawals.
  • Roth IRA: Contributions to a Roth IRA are made with after tax income, meaning you don’t receive a tax deduction when you contribute. However, withdrawals in retirement are tax free if certain conditions are met. This account may be ideal for individuals who expect to be in a higher tax bracket in retirement. Roth IRAs are also tax free to those who inherit them if all IRS rules are followed.
  • SEP IRA (Simplified Employee Pension) and SIMPLE IRA (Savings Incentive Match PLan for Employees): For self-employed individuals and small business owners, a SEP IRA or SIMPLE IRA plan can allow for higher contribution limits for both themselves and/or their employees. And since the SECURE 2.0 Act, they can be set up as either traditional or Roth IRAs.

Annuities

Annuities are financial products designed to convert your savings into a monthly income stream, particularly during retirement. When you purchase an annuity, you exchange a sum of money for guaranteed monthly payments over a set period, or for the rest of your life, much like a pension. (Guarantees are provided by the financial strength of the insurance company providing your annuity contract.)

Annuities can be purchased using pre-tax or after-tax dollars, and they can be purchased with deferred payments over time, or with a lump sum—for example, many people roll over funds from a 401(k) into an annuity. While annuities can provide retirement income, they are not suitable for everyone.

Types of Annuities:

  • Fixed Annuity: A contract offering a fixed interest rate for a set period of time.
  • Fixed Indexed Annuity (FIA): A contract offering guarantees and policy crediting benchmarked to a stock market index, providing potential for growth along with the protection of principal from market downturns. Not actual market investments, instead, with FIAs there is the chance for crediting based on contract terms and index performance. (Guarantees are provided by the financial strength of the insurance company providing your annuity contract.)
  • Variable Annuity: A contract where the value and income payments fluctuate based on the performance of investments chosen within the annuity. The choice of investment subaccounts, like mutual funds, can increase or lose value based on market performance.
  • Registered Index-Linked Annuity (RILA): Like a variable annuity, except there is often a certain level of contractual protection from market downturns.

Life Insurance

Life insurance can provide financial protection for your loved ones by offering a death benefit paid to a beneficiary upon your passing. Policies vary widely, but they generally aim to replace lost income, cover debts, or fund future expenses. Some policies, like permanent life insurance, can also build cash value over time, which can be borrowed for various needs, including retirement income.

It’s important to work with your financial advisor to find the right policy for your needs, and remember, medical underwriting may be required.

Types of Life Insurance

  • Term Insurance: Provides a death benefit if the insured passes away within a specified term (e.g., 1, 2, 10, 15, or 30 years). Premiums are typically level for a certain period but may increase with age. Once the term expires, the policy ends.
  • Whole Life: A permanent policy with fixed premiums and guaranteed cash value accumulation.
  • Universal Life: Offers flexibility in premium payments, death benefit amounts, and the policy’s cash value. It allows policyholders to adjust the death benefit and premiums based on changing needs, and in some cases, premiums can be paid using the cash value. Indexed Universal Life (IUL) policies are benchmarked to a market index like the S&P 500 (but not actually invested in the market) and policies may be credited based on performance, while offering protection from market downturns.
  • Variable Life: Comes in two forms—variable and variable universal life. Both variable life insurance (VL) and variable universal life (VUL) insurance are permanent coverage that allocate cash value to market investment subaccounts which can lose value, but with variable life, there is a fixed death benefit, while with VUL, there is a flexible death benefit and adjustable premium payment amounts.

 

Whether you’re just starting to think about retirement or are near retirement age, it’s never too late to learn more, or take action to create your own personal retirement plan. If you’re unsure about your retirement options or would like assistance planning for your financial future, please reach out to us! You can reach Bay Trust Financial at 813.820.0069.

 

Sources:

https://en.wikipedia.org/wiki/401(k)#

https://www.usatoday.com/story/money/2024/03/19/pensions-are-popular-why-dont-more-americans-have-them/72968970007/

https://www.schwab.com/ira/traditional-ira/withdrawal-rule

https://u.demog.berkeley.edu/~andrew/1918/figure2.html

https://home.treasury.gov/system/files/131/WP-91.pdf

https://www.indeed.com/career-advice/career-development/financial-litteracy

https://www.investopedia.com/guide-to-financial-literacy-4800530

 

 

 

 

Apr 15
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Mitch Zacks – Weekly Market Commentary: Avoid Sudden Moves In This Market

By Weekly Market Commentary

In last week’s Mitch on the Markets column, I offered readers a central takeaway:

“Selling out of the market today [April 5] substantially increases the chances of being whipsawed when a rally takes hold, which again, no one can know the precise timing of.

In the current environment, the setup is that any modicum of good news on trade will factor as a positive surprise for markets going forward, which will almost certainly trigger strong moves higher. Long-term investors simply cannot afford to miss these upswings.”

What a difference a day can make.

In the days following President Trump’s April 2nd announcement, we learned that the U.S.’s new tariff rate was projected to reach approximately 25%, which blew past worst-case scenarios and even surpassed the economically catastrophic Smoot-Hawley tariff levels of the 1930s. But by April 9th, virtually all “reciprocal tariffs” were paused for 90 days. The ‘modicum of good news’ I referenced above was actually a big positive, with the worst-case scenario of tariffs being taken off the table.

There is still the China story, however. Beijing initially responded with retaliatory tariffs of 34% on the U.S. (China is the U.S.’s third largest export market), but in the days since, tariff rates have ratcheted higher. As I write, China has raised levies on U.S. imports to 84%, and President Trump has raised the tariff rate imposed on China to 125%.

What we’re left with today is a 10% universal tariff on all imports into the U.S. and an economic stand-off between the two world’s largest economies. Which is to say, investors should not necessarily expect a durable rally from here. Volatility works both ways, and we are almost certainly not out of the woods yet.

My advice to remain calm and avoid knee-jerk reactions has not changed. This is an event-driven market, meaning that asset prices are essentially in a day-to-day cycle of assessing economic policy announcements, trade negotiations, punitive actions, deals, and/or de-escalation. There is not a secret set of tools investors can use to navigate this type of market—in my view, this is a time to unwaveringly avoid guesswork and to keep focus on owning strong companies in a diversified, long-term focused portfolio.

In other words, tune out the daily noise.

Going forward from here, I again urge investors to avoid trying to guess the next move on trade or any other economic policy. Instead, focus on the big picture. Here are three key points to consider:

1. Potential for Negotiations and Concessions

As we have seen historically and in this latest installment of President Trump’s trade policies, countries may look to offer concessions that can be trumpeted as a win for the U.S., which could result in permanent moderation of the announced tariffs. If the U.S. can secure a few significant negotiations, it could ease market anxiety and potentially put more pressure on China to make a deal.

2. Consideration of Fiscal Offsets

Revenue from 10% universal tariffs could lead the Trump administration to suggest that Congress redistribute some of these funds towards fiscal easing measures elsewhere, like tax cuts, which could help bolster sentiment, GDP growth, and offer counter-cyclical measures to avoid recession.

3.  A Starting Point of Strong Underlying Economic Fundamentals

Despite the tariff shock, certain underlying economic factors remain relatively healthy. The jobs market showed the hiring accelerated in March, and the unemployment rate remains at 4.2%. Households are also in strong overall financial shape, with low debt service payments as a percent of disposable income and steadily rising wages.

Now to be fair, I do not think the impact of 10% universal tariffs, a protracted trade fight with China, and uncertainty in general will have no impact on growth, consumer spending, and other key economic fundamentals. The longer these policies remain in place, the greater the likelihood we see a downshift in growth and possibly a recession in 2025. But again, all these headwinds could go away tomorrow. There is no way to know for sure.

Bottom Line for Investors

In an event-driven market, one of the biggest risks an investor can take is overreacting to a news story. We have already seen that President Trump u-turned away from the most punitive of tariff measures on Day 1 of their implementation, so it does not make sense to anchor your sentiment—or investment decisions—to headlines and especially not to worst-case scenarios. Making investment decisions based on what positive or negative surprise might come next is not only futile, but it can also do real damage to long-term returns.

Going forward, I expect market volatility to persist. After all, there are still 10% universal tariffs in place and an ongoing economic standoff between the U.S. and China. More twists and turns are likely, which makes a disciplined, diversified approach the most effective way to navigate your way through it.

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties.  Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P Mid Cap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Apr 07
Love0

Mitch Zacks – Weekly Market Commentary: Market Shock from Tariffs – How to Navigate Volatility

By Weekly Market Commentary

Late in the week, global stocks made it clear that the tariff announcement was worse-than-expected. We were looking for a roughly 10% effective tariff rate once all the details were parsed, but the actual figure appears to be closer to 20%. That’s also about double what the general market was expecting, and as I’ve written time and again, markets do not like negative surprises.

Panicked investors everywhere are trying to decipher what to do next, which makes the current environment ripe for major missteps.

These are the moments historically when investors start trying to predict what is going to happen next, and the assessments tend to skew sharply negative. In the current environment, it may mean predicting a prolonged trade war, a recession (or worse), and/or more equity market downside. It does not matter if you have been an investor for one year or for 30+ years like me—the chances of being precisely correct are very, very low.

Investors tried to make the same predictions the day after Black Monday in 1987, when the S&P 500 fell -22.61% in a single day. Ditto in 2008, when a plummeting market was accompanied by images of bankers leaving Lehman Brothers with boxes. The Covid-19 pandemic is arguably in a league of its own in this respect, too.

There are very reasonable arguments that the current shift in trade policy should fall into a different category, given the medium- to long-term implications it could have on growth, prices, and global economic order. I could write many columns fleshing out economic theories for and against tariffs, while analyzing every line item of the April 2 announcement and making projections for economic impact. This is the type of work we do at Zacks Investment Management — determining which stocks and bonds to own in portfolios, as we make earnings and interest rate forecasts.

But this is not the type of analysis I think investors should be doing when determining whether or not to stay invested.

Even if we knew for sure the U.S. was either in—or heading for—a recession, it would not necessarily make it a prudent strategy to get out of stocks. The fundamental problem with this decision is that investors cannot know when to get back in, which is a dilemma that’s complicated further by the market’s tendency to rally when the news is still dismal and uncertain.

Think back to the Covid-19 pandemic. These were the biggest S&P 500 selloffs in March 2020:

  • March 6, 2020: -7.6%
  • March 11, 2020: -9.51%
  • March 13, 2020: -11.98%

Some may find it difficult to fathom/remember such steep declines one after the other, but that’s what the market did. If you told me I could travel back in time to March 1, 2020—armed with knowledge that the market was about to experience severe ‘short-term pain’—my position would be the same: I still wouldn’t sell.

That’s because throughout history, the news cycle lags the market by many, many months. When stocks started to surge in 2020, the unemployment rate was double digits, and the vaccine was nine months away from being approved. There were hardly any green shoots to be found anywhere.

And that’s my main point: selling out of the market today substantially increases the chances of being whipsawed when a rally takes hold, which again, no one can know the precise timing of.

In the current environment, the setup is that any modicum of good news on trade will factor as a positive surprise for markets going forward, which will almost certainly trigger strong moves higher. Long-term investors simply cannot afford to miss these upswings. If you put $10,000 into the S&P 500 on January 1, 1980, and stayed invested through March 31, 2025, you’d have $1,635,083.

But if you missed just the five best days in the market over that period, your investment would have grown to just $1,013,782.

That’s over half a million dollars for missing the best five days, which also meant staying invested in the days following the 1987 Black Monday crash, and throughout the Tech Bubble, 2008 Global Financial Crisis, and the Covid-19 pandemic. That’s a very hard series of choices for investors to make, but throughout history it has paid off. I’m convinced it will again.

Bottom Line for Investors

The market’s response to the tariff announcements was unsettling, and I empathize with the challenges and stress such sharp declines can cause for investors. The emotional dimension of market declines can give many investors the urge to act.

But as history has shown, the best course of action is often to resist this urge. Markets are unpredictable day to day—with about a 50/50 chance of gains or losses—but over longer periods, the odds shift dramatically in the investor’s favor. Since 1937, being invested in U.S. stocks for five years has meant earning positive returns 93% of the time. Over 10 years, it’s 97.4%.

Remaining invested during turbulent times is not easy, but it has been—and will continue to be, in my view—the single most reliable strategy for building wealth over time. The power of compounding works best when left alone.

1 Wall Street Journal. March 15, 2025. https://advisor.zacksim.com/e/376582/d-economy-feat5-consumers-pos2/5stkd8/1189097503/h/cEzFYzByPVvCyinLeWRQSlQVBjbe7jfV2huGBrJhdqY

2 Fred Economic Data. February 21, 2025. https://advisor.zacksim.com/e/376582/series-MICH-/5stkdc/1189097503/h/cEzFYzByPVvCyinLeWRQSlQVBjbe7jfV2huGBrJhdqY

3 Google Trends. 2025.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

 

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

 

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P Mid Cap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Mar 24
Love0

Do You Know the Connection Between Income and Medicare Costs? 

By Medicare

As you near retirement you’re probably focused on making sure you have enough income to enjoy the years ahead. While enjoying what you’ve worked hard to build should be a priority, you should also keep in mind that withdrawing the money you’ve saved in traditional 401(k)s and IRAs can impact your Medicare costs throughout your retirement. Read on to see what having a high income could cost you in Medicare premiums and what strategies could potentially help you keep more money in your pocket and less going to Medicare premiums which are deducted from your Social Security check.

Understanding Medicare

First make sure you understand Medicare, how it’s broken up, and what plan you will likely choose. Medicare is sectioned into different parts, each serving a unique role in delivering health care coverage. These parts include Part A, Part B, Part D, and additional coverage options like Medicare Advantage (Part C) and Medigap.

  • Part A (Hospital Insurance): Covers inpatient hospital stays, skilled nursing facility care, hospice care, and limited home health care. This is normally free for most people who have qualified for Medicare coverage.
  • Part B (Medical Insurance): Covers doctor visits, outpatient care, home health care, and preventive services like screenings and wellness visits, along with durable medical equipment (e.g., wheelchairs). Part B coverage is the premium that will be deducted from your Social Security check if you don’t choose Medigap or Part C.
  • Part D (Prescription Drug Coverage): Helps cover the cost of prescription medications, including certain vaccines. You can get Part D as a standalone plan along with Part B or as part of a Medicare Advantage Plan.
  • Medicare Supplemental Insurance (Medigap): Extra coverage from private insurers to help pay for out-of-pocket costs in Original Medicare, such as copayments and coinsurance. Plans are standardized by letter (e.g., Plan G, Plan K).
  • Part C (Medicare Advantage Plans): Private, Medicare-approved plans that may bundle Part A, Part B, and often Part D (prescription drug) coverages. Usually limited to providers within the plan’s network. May have different out-of-pocket costs and additional benefits not available in Original Medicare, like vision and hearing coverage.

 

Comparing Your Choice of Original Medicare with Medicare Advantage

Original Medicare

  • Includes Part A and Part B.
  • Option to add Part D for prescription coverage.
  • Flexibility to see any Medicare-accepting provider in the U.S.
  • You can also add Medigap for extra coverage on costs not covered by Original Medicare.
 Medicare Advantage (Part C)

  • Private, Medicare-approved plans that bundle Part A, Part B, and often Part D (prescription drug) coverages.
  • Usually limited to providers within the plan’s network.
  • May have different out-of-pocket costs and additional benefits not available in Original Medicare, like vision and hearing coverage.

 

Understanding Modified Adjusted Gross Income (MAGI)

There is one thing that will have a huge impact on your Medicare costs— your modified adjusted gross income (MAGI). Your MAGI is your adjusted gross income (AGI) minus allowable tax deductions and credits. Once you retire, you may be surprised to find that a combination of income from pensions, investment earnings, traditional (non-Roth) IRA withdrawals, and traditional 401(k) withdrawals may land you with a higher MAGI than you realized. While you may no longer be earning a traditional income from working a job, your MAGI will still reflect all of your taxable income.

RMD Impacts

A required minimum distribution (RMD) is the amount you are required to withdraw annually from specific retirement accounts, such as traditional (non-Roth) 401(k)s and traditional Individual Retirement Accounts (IRAs). Starting at age 73, you must take your first RMD by April 1 of the following year, and each subsequent RMD must be taken by December 31 each year after. These mandatory withdrawals are added to your taxable income, minus any allowable deductions or credits.

Higher Medicare Premiums for High Earners

How does retirement income connect to Medicare premium costs? If you have a high income, you will be subject to an income-related monthly adjustment amount (IRMAA) that must be paid in addition to Medicare Part B and Part D premiums, and it’s calculated every year. If the SSA determines you must pay an IRMAA, you’ll receive a notice with the new premium amount and the reason for it.

For 2025, the standard monthly premium is $185 per person per month. In 2025, single filers with 2023 MAGI of more than $106,000 and married couples filing jointly with 2023 MAGI of over $212,000 will pay more. (See Two-Year Lookback below for why we used 2023 MAGI.)

The Part B IRMAA surcharge amounts per person per month for 2025 range from $74.00 to $443.90, while Part D surcharges range from $13.70 to $85.50 depending on income!

Other Impacts

Other income sources can also contribute to an increased MAGI. Capital gains, home sale profits, and even Treasury bill yields contribute to a retiree’s MAGI.

Two-Year Lookback

Now that you know what contributes to your MAGI, know that when you go to enroll in Medicare, your MAGI from your tax return two years prior will determine your premiums. This “two-year lookback” rule can catch retirees off-guard if they receive large distributions or gains, increasing their premiums unexpectedly. This is why it’s a good idea to start preparing for premium costs as soon as possible, and be strategic about it. The last thing you want is to be settling into retirement and then be hit with a high premium if you can avoid it. Be aware that the two-year lookback is ongoing throughout your retirement, and your premiums may go up in any given year if your income goes up two years prior.

Potential Strategies

By now you know that your Medicare premiums are directly influenced by your modified adjusted gross income (MAGI)—the higher your MAGI, the higher your premiums may be. To help manage this, it helps to work with a retirement planner years before filing for Medicare at age 65, and years before you plan to retire so that a specific retirement income plan can be created for you.

Your advisor will work with you to map out your retirement with a strategy that includes which accounts to draw from and/or which taxable accounts you might want to convert to Roth accounts to potentially save money for the long-term. It all works together!

 

Planning for Medicare can seem like an overwhelming process. From knowing which retirement accounts to leverage to help keep your MAGI as low as possible, to accounting for that two-year lookback, it can be a lot. That’s why the best place to start in your plan is talking to someone knowledgeable about retirement planning.

If you need help getting started in your Medicare planning, we’re here to help! You can reach Bay Trust Financial at 813.820.0069.

 

 

Sources:
https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/parts-of-medicare

https://www.investopedia.com/terms/m/magi.asp

https://www.investopedia.com/terms/r/requiredminimumdistribution.asp

https://www.cms.gov/newsroom/fact-sheets/2025-medicare-parts-b-premiums-and-deductibles

https://www.kiplinger.com/retirement/medicare/what-you-will-pay-for-medicare-in-2025

 

 

 

Mar 04
Love0

Mitch Zacks – Weekly Market Commentary: Investors Should Start Looking Beyond the Fed

By Weekly Market Commentary

Are You Overexposed to Growth Stocks?

Most investors are aware of the outsized impact growth stocks have had on total returns in the U.S. stock market, at least for the past couple of years. In 2024, the mega-cap technology companies often referred to as AI “hyper-scalers” accounted for 41% of the S&P 500’s total return. And perhaps not surprisingly, the two best performing sectors last year were Communications Services and Technology, where many growth stocks can be found.

Growth stocks have no doubt done well. But there is also a narrative that ‘growth’ is the only category that matters, especially given the view that we could be in the early stages of an AI-driven economic transformation.1

I’m not writing to say this is wrong, or that growth stocks’ momentum is coming to an end soon. My goal in this week’s column is to remind investors that a pure growth mindset can introduce risk in an investment portfolio—whether it’s from over-allocating to growth stocks or underweighting other attractive categories, like value stocks.

2024 offers a useful case study for the argument I’m making. As mentioned, Technology stocks led the way. But we also saw improving performance outside of the Big Tech category, with the median stock in the index returning +12% and leadership changing hands throughout the year. In the second half of the year specifically, value stocks and growth stocks performed roughly in-line with each other, as value staged a strong rally starting in July. A diversified portfolio could have captured this upside with less overall risk.

Investors who simply own an index may think they’re getting this same level of diversification, but they may actually have greater exposure to growth stocks than they’re aware of. Case-in-point: growth stocks made up over 35% of the S&P 500 Index as of the end of last year, which is substantially above the historical average of 24%.

Consider that owning the S&P 500 today could mean over-allocating to growth stocks and under-allocating to value stocks, which means having a portfolio overweight to stocks that trade at high multiples. Value stocks, by contrast, trade at relatively attractive levels today, and are far below their long-term median valuation. I estimate that value stocks would need to rise by some 40% just to get back to this historical valuation.

While past performance doesn’t guarantee future results, it’s noteworthy that the last time the valuation disparity between the Russell Growth and Russell Value indexes was as extreme—back in December 2000—value stocks went on to substantially outperform growth stocks over the following one, three, and five years. High-growth stock prices might eventually steer investors toward more reasonably priced options and expand the market focus beyond just the largest firms.

There’s also an earnings case for looking beyond growth. In aggregate, pretax corporate profit margins are near record levels, and the “non-Magnificent Seven” stocks in the S&P 500 are poised to see double-digit earnings growth for the first time in four years. While the Technology sector is expected to see strong double-digit earnings growth as well, Tech earnings growth is poised to decelerate in 2025 while other sectors in the S&P 500 could see accelerating earnings growth. Investors tend to prefer the latter.

Bottom Line for Investors

Growth stocks have undeniably driven recent market momentum, and have commanded leadership over value for much of the past decade. But over-committing to the growth theme not only increases risk in a portfolio, in my view, it also misses out on other areas of the market that trade at attractive valuations and could see accelerating earnings growth this year.

Growth stocks may grab the headlines, but emerging opportunities in other sectors are equally compelling. As market valuations shift and uncertainty rises, investors with diversified portfolios—like we manage here at Zacks Investment Management—can better position themselves for tomorrow’s gains.
​​​

1 Black Rock. 2025. https://advisor.zacksim.com/e/376582/stocks-underweight-and-unaware/5sndxr/1161199135/h/VLtq2YXm2Rfa8n9y687OZE2OFHPBjPenlz9ruOK-XeA

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties.  Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P Mid Cap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Feb 11
Love0

What’s Your Relationship with Your Finances?

By Financial Planning

An often-overlooked relationship is the one we have with our finances. As we celebrate the month of love, reflect on whether the relationship you have with your finances supports your long-term goals, or if a shift in that relationship is needed.

 

When you think about your finances, what’s the first feeling that comes to mind? Is it confidence? Indifference? Or perhaps anxiety? Like any relationship, your relationship with money requires consistent effort and care if you want it to be a fulfilling one. It’s also a malleable relationship, meaning that even if you feel overwhelmed by financial stress or detached from your goals right now, you can always change it to one that makes you feel confident about your financial future.

In psychology, a common way professionals assess relationships is through attachment theory. Attachment theory offers a framework for understanding how people form emotional bonds, particularly in early life with caregivers. These attachment styles include anxious, avoidant, and secure. Attachment theory can help us see how we approach all kinds of relationships, including the one we have with money!

First, understand your relationship with money was probably determined early on in life, maybe before you even understood the concept of money. This could be when you were a child seeing your parents or caregivers anxiously struggling to make ends meet, or seeing them spend money without considering long-term goals, etc. These early experiences shape how we interact with money and should be considered when assessing your current relationship with your finances. With that in mind, here’s how each attachment style may manifest in present-day financial behaviors:

Anxious

In the clinical sense, anxious attachment is characterized by a fear of abandonment and rejection. These individuals probably had inconsistent caregivers who were sometimes there and sometimes not. This made it hard for them to trust when things were good that the other shoe wouldn’t soon drop. When applied to finances, this could manifest as someone feeling overwhelmed, constantly worried that anything and everything could derail the progress they’ve made. These individuals often lack confidence in their ability to achieve their financial goals, even when all evidence suggests otherwise. Consumed by worry, they may find themselves paralyzed, unable to make the decisions necessary to reach their goals.

Avoidant

An avoidant attachment style involves a fear of closeness and difficulty trusting others as trusting others involved consistent disappointment in their earlier life. If someone has an avoidant style when it comes to their relationship with money, they may detach themselves from financial planning and long-term goals. If they avoid making goals, then there’s no fear of failure, but there will also never be any progress. These individuals might procrastinate, downplay the importance of financial milestones, or dismiss the need for accountability, all as a means of maintaining control while avoiding the potential disappointment that comes with falling short of their goals.

Secure

Finally, a secure attachment style enables an individual to feel safety, stability, and trust in close relationships. These are the people who had caregivers who offered affection when needed, encouraged independence, and were consistent. In the context of finances, someone with this attachment style approaches their goals with confidence. They trust their ability to make decisions that support their goals. They’re able to be present, engaged, and adaptable as circumstances change without feeling overwhelmed. Rather than fixating on the possibility of failure, they focus on success and the steps needed to achieve it.

 

Cultivating a Secure Attachment Style

If you feel like your attachment style leans avoidant or anxious at times, don’t worry! As stated previously, these attachment styles are malleable. This means you can change them! To cultivate a more secure attachment with your finances, think about what the behaviors of someone with a secure attachment might be. Some things you may want to consider:

  • General Financial Wellness: This includes having a monthly budget, an emergency fund, and a robust savings account. All of these will lay a foundation for you to build towards your bigger goals, but remember growing a “robust savings account” or creating a monthly budget are goals in themselves. So don’t let this first part overwhelm you, break it down into smaller, manageable steps and turn each one into its own goal!
  • Maintain Financial Awareness: It’s so easy to check out or lose focus on money. You see your monthly power bill or insurance premium go up, and you think, “Well it’s only $20.” But remember, that’s $240 a year! Push back the resistance that makes you want to ignore things, and instead keep track of bill increases, unnecessary purchases, and anything else that can burn a hole through your wallet. Being aware of these increases is the first step in mitigating them!
  • Set Goals: Know what you want to accomplish, because if you neglect to define your goals you will never achieve them. If your goals feel overwhelming, break them up into smaller goals. When you’re setting bigger, long-term goals, consider the power of compound interest. The returns you can gain over time can significantly help you reach those goals. For example, if you know you want to retire one day and your employer has a matching 401(k) plan, perhaps at the very least contribute enough to take full advantage of that match. If you want to send your child off to college one day, look into a 529 plan. If you are starting younger with a few decades before retirement, time is on your side, so take advantage of it.
  • Protect Yourself and Your Family: While preparing for the unexpected can be difficult, having a plan in place can help you face these challenges without feeling overwhelmed or shutting down. For this, you may want to consider a life insurance policy that works for you and your family. Life insurance policies have evolved over the last decade and can be better shaped to a policyholder’s needs, these policies can even have riders added to them to help you plan for long-term care. A will and/or estate plan will also help give you peace of mind knowing that if anything were to happen to you, you have taken steps to ensure your family will be taken care of, with your wishes spelled out and legally documented.
  • Know Your Triggers: If your attachment style leans anxious or avoidant, understand what triggers that attachment style. You can change your attachment style, but it requires a commitment to remaining present and addressing those maladaptive traits when they pop up. For example, maybe when you receive a bill you put off looking at it until the day before a late fee kicks in. Receiving a bill is the trigger, how can you address that trigger? Maybe you can enroll in automatic payments, or maybe set aside time every so many days to go over your bills, or maybe something entirely different altogether. Addressing your triggers will be something for you to figure out and can widely vary from person to person. The first step for everyone, however, is to face those triggers head-on and look for a solution.
  • Seek Help: Changing your attachment style is no small task, but you don’t have to do it alone! Partnering with an experienced financial advisor can make the process more manageable and less overwhelming. An advisor can help you define your goals, break them down into actionable steps, and provide guidance and support along the way!

If you’re looking for support in navigating your financial attachment style or want guidance to maintain a secure mindset, we’re here to help! You can reach Bay Trust Financial at 813.820.0069.

Feb 11
Love0

Mitch Zacks – Weekly Market Commentary: The Current Equity Risk Premium is Zero. Should Investors Ditch Stocks?

By Weekly Market Commentary

Stocks and Bonds Offer Similar Yields. Does That Make Stocks Too Risky?

As I write, the S&P 500 trades at roughly 22x projected 2025 earnings, and the 10-year U.S. Treasury bond yields roughly 4.5%. That makes the earnings yields on stocks and bonds basically the same.

For clarification, the earnings yield on stocks is derived by dividing the stock market’s expected earnings by its price, which currently equals about 4.5%. When you compare this earnings yield with current bond yields, that gives you the equity risk premium, which theoretically tells investors how much extra reward stocks should offer over bonds.1

As readers can see, that reward is essentially zero today—which also marks the first time we’ve seen the equity risk premium this low since the tech bubble burst.

It is logical to assume that the lower the equity risk premium, the weaker the case for owning stocks versus bonds. After all, according to this metric, investors are not being compensated at all for taking the additional risk of owning stocks over Treasurys. There’s also the case of the late 1990s, when the equity risk premium turned negative and a bear market followed.

In my view, there’s a very reasonable risk argument to be made here about the stock-bond decision. But where the argument starts to fall apart, in my view, is in assuming that a low or even slightly negative equity risk premium tells us anything about future returns. When we look back on history at the relationship between the equity risk premium and forward 12- or even 24-month returns on the S&P 500, the case for correlation fizzles. And there’s essentially no argument for causation.

In 1996, the equity risk premium fell below zero and stayed negative basically until the bear market started in early 2000 (the equity risk premium turned positive for a short time in 1998 with the market correction). Investors could have used this metric to get out of stocks in 1996, but that would have been a mistake. There was still plenty of runway left in that bull.

On the flip side, the equity risk premium was nicely positive—roughly 3%—at the start of the 2008 Global Financial Crisis, and there were periods in the 2010s when bonds outperformed stocks even though the equity risk premium suggested stocks were the better buy. As mentioned, it’s difficult to find a convincing correlation between the equity risk premium and forward returns. There have been many instances where the signal seems to work and others where it doesn’t.

The key thing to remember, in my view, is that stocks’ earnings yield—again, theoretically—tells investors what return they should expect over the long run if earnings stayed constant and no dividends were paid. But as we all know, many stocks pay dividends, and earnings are rarely constant. As we begin to parse Q4 2024 earnings, the picture that emerges is one of improving outlook, with companies not only coming ahead of estimates but also providing reassuring guidance for coming quarters (see chart below).

There’s a scenario where earnings come in far better-than-expected in 2025, while long-duration Treasury bond yields remain range-bound. That would be a positive scenario for stocks, in my view, regardless of whether the equity risk premium turned positive or not.

Bottom Line for Investors

The equity risk premium is a useful metric that investors can use in evaluating the stock-bond decision, but it’s certainly not the only consideration, in my view. Investors should also think about where they expect interest rates, inflation, and earnings to be a year from now, which is another way of assessing whether the equity risk premium is expected to rise or fall looking forward. From my vantage, I expect inflation to moderate, earnings to accelerate, and growth to continue above trend—all of which bolster the case for equities, in my view, even as Treasuries now offer a more attractive risk-free rate.

1 Wall Street Journal. January 27, 2025. https://advisor.zacksim.com/e/376582/bonds-has-disappeared-c3f9c223/5sksqg/1143709360/h/oV5BlINqgf8gjfV1x98TM8Vm5hn9sYINQwDJg8KhF_A

DISCLOSURE
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties.  Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.

The Russell 1000 Growth Index is a well-known, unmanaged index of the prices of 1000 large-company growth common stocks selected by Russell. The Russell 1000 Growth Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Dow Jones Industrial Average measures the daily stock market movements of 30 U.S. publicly-traded companies listed on the NASDAQ or the New York Stock Exchange (NYSE). The 30 publicly-owned companies are considered leaders in the United States economy. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The ICE Exchange-Listed Fixed & Adjustable Rate Preferred Securities Index is a modified market capitalization weighted index composed of preferred stock and securities that are functionally equivalent to preferred stock including, but not limited to, depositary preferred securities, perpetual subordinated debt and certain securities issued by banks and other financial institutions that are eligible for capital treatment with respect to such instruments akin to that received for issuance of straight preferred stock. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The MSCI ACWI ex U.S. Index captures large and mid-cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. The index covers approximately 85% of the global equity opportunity set outside the U.S. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The Russell 2000 Index is a well-known, unmanaged index of the prices of 2000 small-cap company common stocks, selected by Russell. The Russell 2000 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

The S&P Mid Cap 400 provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. An investor cannot directly invest in an index.  The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor.

Jan 17
Love0

Start 2025 Strong with These 5 Financial Wellness Tips!

By Financial Planning

The new year is here, which means a fresh start to be the best, healthiest version of yourself, but don’t limit that to just physical health. Make 2025 the year of prioritizing your financial wellness!

As we welcome 2025, it’s the perfect time to refocus on your health and set the tone for your year. Remember, wealth and health often go hand in hand. Use this time to take a closer look at your financial wellness and identify areas where you can grow, improve, and create a stronger foundation for your future. From doing a general review of your budget to revamping your portfolio, harness the momentum of the new year to help set yourself up for a financially successful and healthy 2025!

 

  1. Review Where Your Money is Going

Do you know where all your money is going? From small impulse buys to monthly bills, the start of the year is a great time to review your spending habits. Take a close look at your spending history to get a clear picture of where your money is going. To begin, think of your expenses as being in one of two groups: either needs or fun. For example, healthcare expenses would fall under needs, while a new wardrobe might fit into the fun category.

Next, break down your expenses into fixed, flexible, and discretionary costs. Fixed expenses are those that stay the same each month, like rent, mortgage, or insurance, while flexible (but necessary) expenses fluctuate, such as utility bills or groceries.

Discretionary costs can be decreased or increased. For instance, if you have necessary extra health or dental expenses for the month, you can choose to spend less on coffee or going out to eat. Remember to think about your life goals when you decide what is discretionary. If you have been putting only a small amount that’s left over each month into savings or retirement, consider changing that to have a fixed amount of savings deducted from your income before it ever hits your checking account.

This is also a great time to review your subscriptions to ensure they are still important to you as well as automatic payments to make sure there haven’t been any overlooked changes you need to rectify. Additionally, you may want to set up spending alerts on your accounts to help you monitor your finances throughout the year.

 

  1. Update Your Budget

Once you understand where your money is going, you can begin to determine your necessary monthly spending. Start by identifying your fixed expenses and calculating an average for your flexible and discretionary expenses to estimate your total essential monthly costs for the new year. You can input this information into a spreadsheet or your budgeting app of choice to compare it with your monthly income. Whether you rely on active income from work or retirement income sources such as 401(k)s, pensions, or Social Security, having a clear understanding of how much money you need to maintain your lifestyle is key.

Living within your means should be your biggest goal, and that may require taking an honest look at your spending habits and developing a strategy to better manage your income. By comparing your income streams to your budget and keeping savings and other financial goals in mind, you can create a sustainable plan for the year ahead.

 

  1. Have an Emergency Fund

Once your budget is set, ensure you have an emergency fund of liquid assets to cover at least three to six months of expenses. (Some people may want or need to have more than that, depending on their situation.) Your emergency fund should remain untouched unless needed for those necessary expenses. This will allow you some cushion during market downturns, unexpected expenses like a car breakdown, or hiccups in your income.

 

  1. Check-Up on Your Portfolio

Your portfolio can play a significant role in your overall financial plan, so it’s important to reassess its performance and consider any adjustments for the year ahead. Take some time to reflect on your goals and any planned life events for the upcoming year. While you can’t predict the future, you can evaluate what you expect the year may bring.

This assessment can influence your risk tolerance and guide decisions about diversifying your investments. If your current strategy doesn’t align with what you anticipate for the new year, now is the perfect time to rebalance your portfolio to help support your financial goals.

 

  1. Keep Your Goals in Mind

In everything you do, keep your goals at the forefront. Whether you’re aiming to build a nest egg for retirement, save for your child’s education, or leave a legacy for your loved ones, your financial strategy should reflect that. This is where strategic financial planning comes in.

For your bigger or more long-term goals, you may want to consider exploring strategies such as Roth conversions or charitable contributions to help with taxes, setting up 529 college savings plans for your children, or purchasing life insurance to create a tax-advantaged legacy for your loved ones. There are countless tools and strategies available, and the right ones for you will depend entirely on your unique situation and goals. By keeping your goals in mind with every financial decision you make this year, you’ll be supporting your long-term success.

 

Planning for the year ahead and the goals it entails can be stressful, but rest assured we’re here to help! If you need help with your financial wellness, give us a call! You can reach Bay Trust Financial at 813.820.0069.

 

Sources:

https://sfs.harvard.edu/financial-fitness-basics

https://solsticeseniorliving.com/financial-wellness-tips-for-seniors/

https://smartasset.com/investing/portfolio-management-tips

 

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

529 Plan, or “qualified tuition plan,” is an investment account that provides tax benefits when the savings are used for qualified education expenses. Withdrawals from a 529 plan account can be taken at any time, for any reason. But, if the money is not used for qualified education expenses, you will incur a 10% penalty and owe taxes on any investment gains.

 

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