Inside the Economy: The State of the Economy and COVID-19

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This week on “Inside the Economy”, we continue to monitor economic data as it continues to improve. Fiscal stimulus comes in many forms, like the direct payments or federal unemployment benefits, and has totaled more than 12% of GDP. What will the next bill look like from Congress and how much more money will be added to the national debt? Gold has had a strong rally as buyers speculate on future inflation and the value of the dollar. What’s to come over the next several months? Tune in to find out more!

Key Takeaways:

  • Economic data continues to improve with retail sales, production increases, and housing data. 
  • Stock market indices continue their recovery lead by big tech as earnings show better than expected. 
  • Gold is rallying and another stimulus bill from Congress is coming soon.

Inside the Economy: The Pandemic Job Market and its Impact

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Today on “Inside the Economy”, we examine the impact that COVID-19 has had on the U.S. job market. As a society, we have witnessed numerous recessions over the last 75 years but none quite like this. How will the uncertainty regarding Coronavirus effect unemployment over the long-term? As Americans wait to see what is next, many are sitting on more cash than usual. How is this impacting spending and has it affected stock market returns? Tune in to find out!

Key Takeaways: 

  • COVID-19 spurred a dramatic change in unemployment numbers, different from previous recessions
  • Although unemployment numbers remain high, we are starting to see an increase in hiring and job openings again
  • We have seen an increase in mortgage delinquency but it is nowhere near 2008-09
  • This year has been a volatile year for all asset classes but gold and 10-year Treasuries remain on top
  • Corporate debt and money supply continue to climb

Does a Roth IRA Conversion Make Sense for you in 2020?

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The Roth conversion has been a tool available to financial professionals for a long time to help clients minimize future tax liability. Conversions are helpful in specific instances, but many times are not applicable to every client situation. What about the culmination of events in 2020 has made the Roth conversion more relevant than years past?

What is a Roth Conversion?

Most employees will contribute to a tax-deferred retirement plan while they are working. This comes in many forms: a traditional IRA, a 401(k), a 403(b), etc. These retirement plans provide you with a tax deduction in the year a contribution is made. The funds then grow tax-deferred until it becomes time to make withdrawals. The IRS requires these account types to withdraw a Required Minimum Distribution at age 72 (changed in 2020 from 70 ½). This means you will pay taxes on the original contributions and the investment growth that has accrued over the years.

A Roth conversion is the transferring of retirement funds from a tax-deferred IRA account into a Roth IRA. Roth IRAs differ from the previous listed account types because taxes are paid in the year in that the contribution or conversion takes place. On top of that, the growth on the contributions/conversions is exempt from taxes and there are no mandatory withdrawals during retirement. 

What is the purpose of a Roth Conversion?

There are a few reasons why Roth conversions are a popular financial planning tool. One of the most common reasonings for converting tax-deferred funds to a Roth is to create a tax-free bucket for withdrawals during retirement. Having both tax-deferred and tax-free assets during retirement provides more flexibility when it comes to tax planning and client portfolio distributions for spending.  Roth conversions can also be appealing if you expect to be in a higher marginal tax bracket in retirement than the year you make the conversion. This is rare, but plausible especially in unique circumstances like this year. By strategizing, you may be able to use this tool to make a series of smaller conversions during years with lower tax implications to minimize taxes paid over the long run. 

If you have time on your side, compounding returns on the conversions could benefit you over a long period of investing. On traditional IRA assets, investors pay taxes on investment gains when they withdraw money but with Roth assets, the gains grow tax-free. It is also a tool for investors who would like to leave tax-free assets to their heirs. If that is the case, a Roth conversion may make sense for your situation. 

Why is this a relevant topic in 2020?

This year has been filled with trials and tribulations and we still have half a year ahead of us. From a global pandemic to world-wide protests and heightened discussions regarding race discrimination, the world has seen a great deal of challenges and change in 6 short months. What about this year makes the conversation regarding Roth conversions more relevant than years past? First off, many Americans are going to see less income this year in comparison to prior years. This could be due to losing a job or seeing less customers during the government stay-in-place order. This could also be due to The Cares Act allowing those who are required to take Required Minimum Distributions to skip it for the year 2020, creating less taxable income this year. We are also living during a time of historically low-income tax brackets. With the increase in government spending, unemployment benefits and use of federal resources, we will most likely see increased tax rates in our future. If that is the case, it may make sense to pay taxes this year before they are raised. 

Our team at Sharkey, Howes & Javer is here to help you explore all your financial options. Contact Sharkey, Howes & Javer today to speak with a CERTIFIED FINANCIAL PLANNER™ to see if a Roth conversion makes sense for you in 2020.

Inside the Economy: Catching Up with COVID-19

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This week on “Inside the Economy”, Americans have spent the last few months saving more and spending less. As spending begins to resuscitate, where are we seeing inflation in the system? We are starting to see an increase in travelers making their way through TSA but are nowhere near the 2.5 million flyers per day we saw during summer 2019. How are the airlines coping with the slower summer days? Through a volatile market, who are the current winners and losers? Tune in to find out!

Key Takeaways:

  • Initial jobless claims are decreasing in Colorado while some are going back to work— others are still hesitant to spend their hard-earned money
  • The demand for recreation services and outdoor equipment has increased prices 
  • Home sales are picking back up as Americans are staying local
  • Airlines are leaning on CARES Act Support to navigate through hard times
  • The U.S. dollar has been losing strength in conjunction with oil prices and low interest rates


Inside the Economy: The New Normal and COVID-19

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This week on Inside the Economy, we address the beginning of the end of a great social experiment. Human behaviors have changed and will continue to evolve as businesses and consumers move forward. The S&P 500 continues to separate itself from the grim economic data with positive performance. Why is there such a disconnect? One catalyst may be how quickly the Federal Reserve and Congress acted to maintain liquidity in capital markets. As we adjust to the impact of COVID-19, the markets may start focusing more on other potential volatile events, like what is going on in Hong Kong and an upcoming presidential election. Tune in to hear more!


Inside the Economy: Spending Patterns and Coronavirus

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Today on “Inside the Economy with SH&J”, we take a look at where people are investing their hard-earned money. Americans are spending less on their credit cards but are investing in real estate and home improvement projects. While some are purchasing new homes, others are struggling to make their mortgage payments. Will the missed payments have a long-term economic impact? The stock market has made a slow but steady recovery, have we seen the worst of it or is there more volatility to come? Amazon has proven it can weather the storm, but how are other retailers holding up?


Inside the Economy: Bleak Economic Data and COVID-19

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This week on Inside the Economy, we begin to see the economic impact of COVID-19 in the numbers. No surprise, unemployment claims have surged. The next question we need to address is how long will people stay unemployed? The first quarter GDP readings contracted -4.8%, the most since 2008. More than likely, second quarter GDP will decline further, but the U.S. is doing relatively well compared to other countries economic decline. With earnings season wrapping up, health care, consumer staples and technology reported better than expected while other sectors struggled. Tune in to hear more!


Inside the Economy: COVID-19 and the Economic Interruption

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This week on Inside the Economy, we continue to talk about the impact COVID-19 is having on the global economy. The U.S. government has interrupted the momentum of the economy asking American people to stay home. The U.S. has already injected liquidity of approximately 11% of GDP into the system. What will the final cost be? As some states gear up to start reopening certain parts of the economy, one thing is certain, there will be clear winners and losers. Tune in to hear more!


Inside the Economy: The COVID-19 Impact and Fed Reaction

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This week on Inside the Economy, we dig into the economic implications from the Coronavirus. Unemployment numbers have jumped up from their all-time low—how has the virus impacted the hiring process and what industries are seeing the biggest effects? We have seen highs and lows in the stock market this year. What is to come as we head into first quarter earnings season? We break down the CARES Act and how it reflects what the U.S. has learned from 2008. Tune in for this and more!


Inside the Economy with SH&J: Into the Unknown with COVID-19

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On this week’s Inside the Economy, we discuss the sharp contraction in the markets with the S&P 500 dropping more than 30% since its all-time high on February 19th. Although it looks and feels like a recession, what economic indicators signify a true recession and when will we learn if we are living through one? How has social distancing impacted the economy and what is the Federal Reserve and government implementing in order to help ease financial stress? Find out on today’s Inside the Economy.