1% Moves in S&P 500

If you’ve felt like stock prices were a little more volatile in 2022 than in recent years, your “spidey senses” are right on the money.

The S&P 500 has posted 81 daily moves of at least 1% through August. Of those moves, 39 have been to the upside and 42 to the downside.

In the chart below, I highlighted 2022 to show how it compares to other years since 2000. Since the daily report was compiled, stocks have seen a few more 1% swings. With more than 70 trading days left in the year, my hunch is we could see more.

What’s fueling the volatility? The Fed, largely. Its monetary policy of raising interest rates to slow inflation without triggering a recession has created a lot of uncertainty.

Price swings are unnerving, but as the chart shows, they are nothing new. What’s most important is focusing on your goals and not paying too much attention to Wall Street’s daily ups and downs.

Four Steps to Valuing an Estate

Determining the value of an estate is a fundamental first step in estate management and a critical requirement for settling a decedent’s estate.¹

How to Assess the Value of an Estate

1. Select the date of calculation. Because values move up and down, you need to set a specific date for a valuation. For a living person, you are free to pick any date. If you’re assessing the value of a decedent’s estate, you may choose either the date of death or the date six months after their death (the “Alternate Valuation Date”). If you use the Alternate Valuation Date, any asset sold or distributed during the first six months following the death must be valued as of the date of sale or distribution.²
2. Determine the assets comprising the estate. This asset list should include everything an individual owns or has ownership interests in.
3. Gather all financial statements as of the date of calculation. If an account is owned individually, the entire value should be calculated in the estate. If owned jointly with a spouse who has rights of survivorship, then 50 percent of the value should be included.
   Remember to:
   -Deduct any outstanding mortgage balance.³
   -Include life insurance when the policy owner is the deceased individual or the beneficiary is the decedent’s estate.³
4. Calculate deductions. Subtract any debts from the total value of assets. For the decedent, this may also include any regular bills that may be due (e.g., utilities, medical expenses, etc.), charitable gifts, and state tax obligations.

Assessing the precise value of an estate can be complicated, especially when settling an estate. Please consult a professional with estate expertise regarding your individual situation.

Retirement Seen Through Your Eyes

How do you picture your future? Some see retirement as a time to start a new career. Others see it as a time to travel. Still others plan to spend more time with family and friends. With that in mind, here are some things to consider.

What do you absolutely need to accomplish? If you could only get four or five things done in retirement, what would they be? Answering this question might lead you to compile a “short list” of life goals, and while they may have nothing to do with money, the financial decisions you make may be integral to pursuing them.

What would revitalize you? Some people retire with no particular goals at all. After weeks or months of respite, ambition may return. They start to think about what pursuits or adventures they could embark on to make these years special. Others have known for decades what dreams they will follow … and yet, when the time to follow them arrives, those dreams may unfold differently than anticipated and may even be supplanted by new ones.

In retirement, time is really your most valuable asset. With more free time and opportunity for reflection, you might find your old dreams giving way to new ones.

Who should you share your time with? Here is another profound choice you get to make in retirement. The quick answer to this question for many retirees would be “family.” Today, we have nuclear families, blended families, extended families; some people think of their friends or their employees as family.

How much do you anticipate spending? We can’t control all retirement expenses, but we can manage some of them. The thought of downsizing your home may have crossed your mind. One benefit of downsizing is that it can potentially lead to no mortgage or a more manageable mortgage payment.

Could you leave a legacy? Many of us would like to give our kids or grandkids a good start in life, but leaving an inheritance can be trickier than many realize. Tax laws are constantly changing, and the strategies that worked years ago may have more limited benefits today.

Keep in mind this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax or legal professional before modifying any part of your overall estate strategy.

How are you preparing for retirement? This is the most important question of all. If you feel you need to prepare more for the future or reexamine your existing strategy in light of recent changes in your life, conferring with a financial professional experienced in retirement approaches may offer some guidance.

A Taxing Story: Capital Gains and Losses

Chris Rock once remarked, “You don’t pay taxes – they take taxes.” That applies not only to income but also to capital gains.

Capital gains result when an individual sells an investment for an amount greater than their purchase price. Capital gains are categorized as short-term gains (a gain realized on an asset held one year or less) or as long-term gains (a gain realized on an asset held longer than one year).

Keep in mind that the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

Long-Term vs. Short-Term Gains

Short-term capital gains are taxed at ordinary income tax rates. Long-term capital gains are taxed according to different ranges (shown below).¹

Long Term Capital Gains Tax Brackets (for 2022)

It should also be noted that taxpayers whose adjusted gross income is in excess of $200,000 (single filers or heads of household) or $250,000 (joint filers) may be subject to an additional 3.8% tax as a net investment income tax.¹

Also, keep in mind that the long-term capital gains rate for collectibles and precious metals remains at a maximum 28%.²

Rules for Capital Losses

Capital losses may be used to offset capital gains. If the losses exceed the gains, up to $3,000 of those losses may be used to offset the taxes on other kinds of income. Should you have more than $3,000 in such capital losses, you may be able to carry the losses forward. You can continue to carry forward these losses until such time that future realized gains exhaust them. Under current law, the ability to carry these losses forward is lost only on death.³

Finally, for some assets, the calculation of a capital gain or loss may not be as simple and straightforward as it sounds. As with any matter dealing with taxes, individuals are encouraged to seek the counsel of a tax professional before making any tax-related decisions.

Important Details on Student Loan Relief

The White House recently forgave up to $10,000 to student loan borrowers as part of a larger debt forgiveness program. There are still quite a few questions to be answered, but here are some key points to know.

Pell vs. non-Pell: Loan forgiveness of up to $10,000 is available to non-Pell Grant recipients and up to $20,000 for Pell Grant recipients. Only Federal student loans are able to be forgiven. Loans held through a private lender are ineligible for this program.

No Surplus: The amount of student loan forgiveness available depends on how much you still owe. If you only owe $8,000 in federal loans but qualify for $20,000 of relief, you will not be receiving the surplus of $12,000.

Income Cap: Borrowers with pandemic-era salaries under $125,000 (for individuals) or under $250,000 (for married couples or heads of households) are eligible for relief.

Loan Dates: Federal loans taken out after June 30, 2022, do not qualify for loan forgiveness.

Application Process: Depending on your lender, you may already be approved and have your account credited by the end of the year. However, an application is expected to be released in the coming weeks before the student loan payment pause ends on December 31, 2022.

Be Aware: As more details are released, scams may also pop up. Remember to practice caution and good business sense if someone contacts you about your student loans.

As always, I’m happy to help with any questions you may have.