Windsor Wealth Management LLC

Investment service in Topsfield, Massachusetts

Financial Planning

2025 Tax Planning Resources & Key Financial Data Spreadsheet

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Happy New Year!

As we kick off a new year, it’s time to turn our attention to the upcoming tax season.

This post is intended as a year-long resource, so keep it handy.

2025-Tax-Planning-Resources

2025 Tax Planning Resources

Today, we discuss:

  • 2025 key financial data, including tax brackets, retirement plan distribution limits, Medicare premiums, standard deductions, child tax credit, and more. (Summarized in an organized spreadsheet.)
  • Changes in the IRS 2025 retirement contribution limits and a new “super” catch-up contribution for those aged 60-63.
  • Using QCDs earlier in the year.
  • The HSA’s triple tax benefits.
  • Why income taxes “may” increase in 2026.

2025 Key Financial Data (Useful Spreadsheet)

Keep this spreadsheet (links to our website) handy throughout the year. (Updated post President Trump signing the One Big Beautiful Bill Act (OBBBA) on July 4, 2025.)

Within it, you’ll find 2025 tax brackets, retirement plan distribution limits, Medicare premiums, standard deductions, child tax and education credits, tax rates for long-term capital gains and qualified dividends, tax on Social Security benefits, and much more.

If you’d like a quality hard copy, let us know. We’re happy to mail one to you or feel free to stop in.

IRS 2025 Contribution Limit Changes & New “Super” Catch-Up Contribution

We encourage maximizing your retirement savings contributions. If you’re unsure how, reach out. Let’s explore strategies to increase your savings.

401(k), 403(b), 457, TSP & SIMPLE IRAs Limits:

General Limit: $23,500 (401(k), etc.)

General Limit SIMPLE IRA: $17,600 (< 26 employees) or $16,500 (> 26 employees)

Age 50+ Catch-Up: $7,500 most plans; $3,500 (SIMPLE IRAs)

Ages 60-63 “Super” Catch-Up: $11,250 most plans; $5,250 (SIMPLE IRAs)

Traditional & Roth IRAs:

General Limit: $7,000

Age 50+ Catch-Up: $1,000

Key Change: The “super” catch-up contribution allows individuals aged 60-63 to increase their retirement savings by contributing more (generally $11,250) to their employer-sponsored retirement plans.

Use QCDs Earlier in the Year

With a Qualified Charitable Distribution (QCD), you can transfer up to $100,000 directly from your IRA to a charity tax-free. It’s often beneficial to take your QCDs before your Required Minimum Distributions (RMDs), since it can lower your taxable income.

Here’s how it works:

RMD: Let’s say your RMD is $20,000.

Donation: You donate $3,000 to charities directly from your IRA.

Deduction: This $3,000 is deducted from your $20,000 RMD.

Taxable Amount: You only pay taxes on the remaining $17,000.

There are other benefits to using QCDs earlier in the year, including avoiding potential delays that can sometimes occur during the busy year-end season.

Also, if you have a charity in mind, making your QCD early in the year provides the charity with the funds sooner, putting your donation to work faster.

Important Note: When using Fidelity for a QCD, you won’t receive a tax form. To claim the tax deduction, you’ll need to inform your tax advisor.

At Windsor Wealth Management, we regularly facilitate QCDs for our clients, and we’re happy to engage with your accountant.

HSA: Triple Tax Benefits

Health Savings Accounts (HSAs), offer several tax benefits to help you save money on health care costs.

Keep in mind, HSAs are only available to individuals enrolled in a high-deductible health plan, have no other health care coverage, and are not enrolled in Medicare or claimed as a dependent.

Here are the triple tax benefits:

#1—Tax-Deductible Contributions: The money you contribute to an HSA is tax-deductible, meaning it reduces your taxable income, which can lead to tax savings in the present.

#2—Tax-Free Growth: Any investment earnings your HSA accumulates grow tax-free, allowing your savings to potentially build up more quickly over time.

#3—Tax-Free Withdrawals: When you use your HSA funds to pay for qualified medical expenses, such as doctor’s visits, prescription drugs or hospital stays, the withdrawals are tax-free.

Also, HSAs have no “use it or lose it” rule. The funds can roll over indefinitely from year to year. (Whereas, unused funds in a Flexible Spending Account (FSA) are typically forfeited at the end of the plan year.)

For 2025, HSA contribution limits are:

Self-only: $4,300

Family: $8,550

Individuals aged 55 and older can make an additional $1,000 catch-up contribution.

Income Taxes May Increase in 2026

The Tax Cuts and Jobs Act (TCJA) is a tax law passed in 2017 that made significant changes to the US tax code.

Many of the individual tax cuts under the TCJA are set to expire at the end of 2025. If Congress doesn’t extend these provisions, income tax rates for many Americans could increase starting in 2026.

Under the TCJA, marginal tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%.

If the TCJA expires on 12/31/25, then marginal tax rates will revert to their permanent pre-TCJA levels of 10%, 15%, 25%, 28%, 33%, 35% and 39.6%, according to a Congressional Research Service report.

Want to see how the potential expiration of the TCJA might affect your taxes?

Our software can illustrate the potential tax implications of different income levels.

Contact us if you’d like to see how your tax burden could change under various circumstances.

Quick Look: 2024 Market Performance

In short, 2024 was a great year for the stock market, with the S&P 500 finishing up 25.02% for the year, and 3% in the last quarter.

Communication services and big tech led the way, consistently outperforming the rest of the market, largely due to the rise of artificial intelligence. Compared to 2023, there was broader market participation in 2024, with sectors beyond communication services and big tech contributing more evenly to the market’s growth.

Looking ahead to 2025, company valuations are high, so we may not see as strong a year.

Fidelity does a nice job recapping 2024 in their article, 2024 Stock Market Report. It’s an easy read too.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Bay Colony Advisors, DBA Windsor Wealth Management, is not a Certified Public Accountant and does not provide tax, legal, or accounting advice. Any tax-related information provided is for general informational purposes only and should not be construed as legal or tax advice. Each individual’s tax situation is unique, and you should consult with your own tax, financial, or legal advisors before making any decisions. We strongly recommend seeking the advice of a qualified CPA or other professional for personalized tax advice.

What’s the Santa Claus rally phenomenon? 5 Potential Factors

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Ho, Ho, Ho.

The year just isn’t complete without mentioning the Santa Claus rally.

Santa Claus Rally
Photo by Microsoft’s AI Image Creator

Santa Claus Rally

The Santa Claus rally is a stock market seasonal trend; specifically, stocks tend to rise during the last five trading days of December and the first two days of January.

The Santa Claus rally phenomenon is often attributed to several factors, including:

Increased Optimism: Investors are feeling festive.

Vacations: Many institutional investors are on vacation, (i.e., fewer large trades reduce market volatility).

Less Tax Activity: Tax-loss harvesting typically slows down in late December, compared to early December.

Window Dressing: Financial firms may make strategic buys in December to improve the appearance of their portfolios.

Year-End Bonuses: Many individual investors use their year-end bonuses to buy stocks, which can boost market activity and prices.

Will it be a jolly good December for stocks?

Only time will tell!

While we’re waiting, here’s a quick look at the last 26 years:

Santa Claus Rally
Source: Investor’s Business Daily

Related: For more stock market seasonal trends, check out our blog post, Stock Market Seasonality and the September Effect.

Happy Holidays

As the year winds down, I hope you find time to relax and recharge. Reach out anytime.

With gratitude,

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Economic Update, Investment Moves & Year-End Strategies

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As we approach the Thanksgiving holiday, I want to take a moment to express my sincere gratitude for your continued trust and business.

It’s an honor to work with you and help you achieve your financial goals.

I hope this Thanksgiving season brings you joy, good health and quality time with loved ones.

Economic Factors and Investment Moves
Photo by Debby Hudson, Unsplash

Today, we discuss:

  • Key economic factors, including consumer spending, the October jobs report, inflation and interest rates.
  • Your portfolio and our money moves.
  • Year-end financial actions to take.

Consumer Spending

While consumer spending remains strong, it’s showing signs of slowing.

Overall, consumers are focused on value. They’re trading down (and have been for months), favoring value retailers like Walmart and Marshalls. Many consumers trading down are also buying smaller package sizes and reducing purchase frequency.

Heading into the holiday season, those with higher incomes are sailing right along, however, others with lower incomes are struggling to manage increased costs.

Although wages have risen, inflation has eroded much of the gains, leaving little room for increased purchasing power.

New Jobs Declined Sharply (However)

The Bureau of Labor Statistics reported 12,000 new jobs were added in October, a steep decline from September (223,000 new jobs).

However…

Acting Secretary of Labor Julie Su attributed the decline to “significant impacts from hurricanes and strike activity,” adding that the strike activity (Boeing) reduced employment growth by 41,000 jobs.

The strike disrupted Boeing’s production, which affected its supply chain and other industries. This led to a temporary decline in manufacturing jobs.

Also, many companies didn’t report their job numbers on time, adding to the decline.

Conversely, the unemployment rate held steady at 4.1% in October, unchanged from September. In general, whoever wants a job can find one.

Interest Rates & Inflation

The Fed lowered interest rates again in early November by 0.25%, marking the second rate cut this year. The initial cut of half a percentage point occurred in September.

Inflation is at 2.44%. Last month it was 3.36%. It peaked at 9.1% in June 2022. (The Fed aims for a 2% inflation rate.)

Overall, inflation has cooled. However, prices remain elevated since surging 20-30% over the past several years. The rate of increases has slowed, yet it’s unlikely we’ll return to pre-inflation pricing levels.

Related: Check out our post, Rising Prices: try these saving tips to free up cash.

Client Portfolios & Money Moves

Moderately allocated portfolios are up just over 20% for the past 12 months.

We’ve been taking profits on some investments appreciated by 35% or more, especially those held in tax-advantaged accounts like IRAs. This strategy also helps rebalance your portfolio.

Preparing for December

Many mutual funds distribute capital gains in December, creating a taxable event. Therefore, we may sell some of the mutual fund(s) to avoid capital gains taxes.

To minimize capital gains taxes, we prefer Exchange Traded Funds (ETFs).

ETFs are generally more tax-efficient than mutual funds.

Why? Because ETFs are created and redeemed in large blocks, minimizing the need for frequent trading and triggering capital gains distributions. In contrast, mutual funds often buy and sell securities to accommodate investor transactions, which can lead to higher tax bills.

We’re always striving for tax efficiency!

Related: We just published, A Disciplined, Research-Driven Approach to Investment Success. Key points include tax-smart investing and our daily monitoring and rebalancing of accounts. (We review 20-to-30 client accounts daily.)

Magnificent 7 (Mag 7) Causing Overweighting in Portfolios

We’re actively focused on ensuring portfolios are balanced and, therefore, keep a close eye on any overweighting within portfolios.

Many investment funds are concentrated in large cap stocks, like the Mag 7 (Apple, Microsoft, Amazon, Nvidia, Tesla, Alphabet (Google) and Meta (Facebook/Instagram/Threads).

These companies are massive!

Here are two examples:

#1—Amazon and Microsoft are worth as much as the entire German economy (the largest economy in Europe).

#2—The Mag 7 are almost worth as much as the entire European Union’s GDP.

Overweighting Example & Financial Risks:

The Mag 7 stocks currently account for about 30% of the S&P 500’s total weighting.

This can lead to concentration and high-valuation risks.

Specifically, a fund’s performance is heavily tied to a few stocks, increasing its sensitivity to their fluctuations. Also, the Mag 7 stocks have increased in value substantially, prompting the question:

Do we really want to pay this extreme value?

To help safeguard against these risks, we’re analyzing “equal-weighted funds,” (e.g., if an investment has 100 holdings, each holding is only 1% of the fund).

These funds have the potential for more diversification and outperformance. Historically, equal-weighted funds have sometimes outperformed market-cap-weighted funds, (e.g., Vanguard 500 Index Fund, VFIAX) especially during periods when smaller companies outperform larger ones.

Back to overweighting…

A major Wall Street concern about the Mag 7 and other large corporations is their massive AI investments. Specifically, will this spending erode earnings?

Only time will tell.

Reminder: Year-End Financial Actions

Finally, just a reminder to revisit the following financial items by December 31:

  • Retirement Plan Contributions
  • Charitable Contributions, Including Qualified Charitable Distributions (QCDs)
  • Required Minimum Distributions (RMDs)
  • Health Savings Account (HSA) (Ideal for tax-free growth.)
  • Converting Employee-Sponsored 401(k)s to a Roth 401(k)
  • Partial or Full Roth Conversion (Helps minimize lifetime taxes.)
  • Defer Compensation for High Earners (If you’re preparing to retire, deferring income to the years immediately following retirement may help spread out your income and reduce taxes.)

See our Key Financial Data 2024 spreadsheet for retirement plan contribution limits, catch-ups, etc. For more information describing the above action items, read our post Essential Year-End Financial Action Items.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

4 Financial Action Items for Early Fall

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As the leaves change and the days grow shorter, it’s the perfect time to take a fresh look at your financial goals and refresh financial plans before the year closes.

Financial Action Items for Early Fall
Photo Credit: Anna Zakharova, Unsplash

Today, let’s consider the following 4 financial actions:

#1—Revisit Your Retirement Plan Contributions (see example)

#2—Identify Recent Life Changes and Tax Implications

#3—Prepare for Year-End Charitable Donations

#4—Utilize Household Improvement and Energy Tax Credits

Deep Dive: For a detailed look at U.S. and global economic trends, read Capital Group’s Economic Indicators.

#1—Revisit Retirement Plan Contributions

Maximizing contributions to your company’s retirement plan can have a significant impact on your future quality of life.

Plus, if your employer offers matching contributions, that’s essentially free money!

And let’s not forget the power of compound interest—it can play a major role in shaping your retirement lifestyle.

Simple Example:

Imagine you’re planning to retire in five years.

After reading this, you decide to increase your retirement plan contributions by $300 per month.

Over five years, with an annual return of 7% compounded annually, that extra $300 a month could grow to almost $21,000 (i.e., a new roof, two luxury two-week European vacations, or 210 dining-out meals for a couple, according to Gemini AI).

And, the above numbers don’t include your employer’s contributions.

Here’s the compound interest calculator we used.

Another Consideration: Many employers offer Roth 401(k)s and IRAs, in addition to traditional retirement plans. If you’re currently contributing to a traditional plan and have access to a Roth option, let’s discuss whether switching might be beneficial for you.

Finally, don’t forget to max out your health savings account (HSA) if you have a high-deductible health plan. HSAs are tax-deductible, ultimately reducing your taxable income and possibly placing you in a lower tax bracket. Remember, qualified withdrawals are tax-free.

#2—Identify Life Changes and Tax Implications

If you’ve recently experienced the following, please contact us as soon as possible.

Employment Changes—New job or raise? Let’s revisit your retirement income plan to address potential changes in benefits, income or life insurance.

Family Dynamics—Divorce, marriage, adoption, parent needing caregiving or a child with special needs? With changes, you’ll likely need to re-optimize your financial and estate strategies.

Health Concerns—Serious illness or nearing 65? Let’s discuss Medicare and your spending options.

Large Expenses or Inheritance—Planning a big purchase, sale or received an inheritance? Let’s prepare for the tax implications.

Many of the above events can trigger a need to revisit your tax withholdings to help ensure you’re on target for 2024.

Here’s a detailed chart (on our website) reflecting the 2024 tax rate schedule, standard deductions, retirement plan contribution limits and more.

Key Resource: Download our Prolonging Retirement Income Checklist. It’s packed with important questions to ponder.

#3—Prepare for Year-End Charitable Donations

It’s best to start planning your year-end charitable donations early, particularly if you’re planning to donate stocks or other appreciated assets.

Considerations Include:

Matching Gifts: Maximize your charitable giving with matching gifts from your employer. Consider suggesting a cause you’re passionate about. Reach out to your HR department to inquire about this option.

Volunteer Your Time: In addition to financial donations, volunteering can make a significant impact. Many employers offer paid time off for volunteer activities. Have you used your hours?

[Related Article]: Help others, help yourself? Why volunteering can be good for you.

Donate Appreciated Assets: Giving appreciated assets like stocks or bonds to a charity can provide a significant tax benefit. You can deduct the fair market value of the asset, avoiding capital gains tax.

Donor-Advised Funds: These funds allow you to make a tax-deductible donation now and distribute the funds to charities over time.

Qualified Charitable Distributions (QCDs): If you’re over 70½, you can make a direct contribution from your IRA to a qualified charity, reducing your required minimum distribution (RMD).

#4—Utilize Household Improvement & Energy Tax Credits

There’s an abundance of improvements you can make to your primary residence and receive potential tax credits, including energy-efficient doors, windows, insulation, roofs, furnaces, water heaters and more.

Here’s a detailed list by the IRS describing what qualifies: Energy Efficient Home Improvement Credit.

Also, Massachusetts offers several energy rebates and incentives as well as New Hampshire; and be sure to check with your respective energy providers for their unique incentive programs.

Tip: Before you pay to recycle an old dehumidifier, refrigerator or similar, check to see if your energy provider offers free pick-up and a rebate. Many do.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Q2 Stock Market Results, Job Creation Cooling, Rate Cut Likely

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It’s hard to believe it’s already August.

Where does the time go?!

We hope you’re enjoying a healthy and relaxing summer.

Acadia National Park
Acadia National Park
Photo by Peregrine Photography

Today, we’re discussing:

– Last quarter’s stock market results.

– Factors driving market movements.

– Noticeable slowdown in new jobs.

– Reasons for the early August market correction.

– Potential September interest rate cut.

– Changes we’re making to your portfolio.

Q2 Stock Market Results

The market performed well last quarter.

From January through June, it saw an overall increase of about 15%, with Q2 contributing 4.25% of this growth.

The Magnificent 7 (Apple, Microsoft, Amazon, Nvidia (computer component manufacturer), Tesla, Alphabet (Google) and Meta (Facebook/Instagram/Threads) continue to drive the market’s growth.

However, in the past several days the tech giants are down roughly 20% compared to the overall market.

Why?

Because they’re overvalued.

The other 493 stocks in the S&P 500 are generally performing well. While they haven’t seen the 100%+ gains like the Magnificent 7, their steady performance is a positive sign, reinforcing the benefits of diversification.

Recent Development

A new trend we’re seeing is the sell-off of tech stocks.

Investors are rebalancing by taking profits from these stocks and shifting their investments to more stable, dividend-producing stocks.

Berkshire Hathaway Sold 50% of Its Apple Shares

Speaking of selling tech stocks, Warren Buffett, chairman and CEO of Berkshire Hathaway, supported the sale of roughly 50% of the firm’s Apple stake since the start of the year. Keep in mind, the firm still owns about 400 million shares of Apple stock!

What’s driving the tech selling?

A few things are likely: economic caution, profit taking and maneuvers spurred by the recent jobs report.

July 2024 Jobs Report

According to the Bureau of Labor Statistics (BLS), the U.S. economy added 114,000 jobs in July, a noticeable slowdown from June’s 206,000 jobs.

The unemployment rate also rose to 4.3% in July from 4.1% in June.

Unemployment Rates at a Glance (Last 20 Years)

Job Creation Is Cooling Unemployment Trends
Explore more unemployment factors here, including unemployment by age and education.

Another Interesting Fact From the BLS Jobs Report:

The number of people employed part time for economic reasons rose by 346,000 to 4.6 million in July.

These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

Suffice it to say, the labor market is cooling some. Also, much of the recent job creation is government and health care jobs.

Early August Stock Market Activity

August started with a market correction.

Interestingly, 94% of years have a decline of 5% or worse (see chart). Said differently, the U.S. stock market experiences a correction almost every year.

By definition, a market drop of 10% is considered a correction, while a drop of 20% signals a bear market, the latter occurring about every four years.

Even with the correction, we’re still up about 13% on the year.

Remember, the stock market dislikes uncertainty—the jobs report, upcoming elections, recession rumors and geopolitical turmoil (Iran-Israel tensions) often cause market movements in every direction.

Will the Fed Cut Interest Rates This September?

It’s likely they will, as well as in November and December. Given the recent jobs report and signs of economic slowing, there’s increasing pressure on the Fed to cut rates.

Keep in mind, the Fed’s focus is managing inflation and maintaining full employment. In general, they’re not supposed to care about the stock market.

Your Portfolio

We’re focused on balancing portfolios.

Recently, portfolios have become overweighted in tech stocks due to the sector’s rapid growth over the past few months.

It’s time to take some profits.

After extensive financial modeling, we’re also pulling out of the Vanguard Health Index (VHT). While it’s been one of our favorite investments, it’s now causing health care to be overweighted in portfolios as other funds have added more health care stocks to their mix.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

3 Steps To Help Your Money Outlive—You

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Today, we help you understand how to make your money outlive you.

The topic of “outliving your money” arises often.

To help ensure your money outlives you, understand these three concepts:

#1—Understand the 4% Withdrawal Rule

#2—Include Retirement “Smile” Spending Changes

#3—Apply Sophisticated Financial Modeling Guardrails

Let’s look at each step in detail and dispel a popular retirement money myth.

Step #1—Understand the 4% Withdrawal Rule

The 4% retirement income withdrawal rule has been used for decades by many investors and financial advisors.

It’s a general rule-of-thumb to help ensure you don’t overspend and, therefore, run out of money during retirement.

Specifically, 4% is considered a sustainable annual withdrawal rate that maintains your savings throughout retirement.

It’s a helpful benchmark.

However, it often doesn’t include all income forms (e.g., apartment rental, Social Security, pension, etc.), or life events (e.g., divorce and helping adult children financially).

4% Rule in Action: Married Couple Example

The below chart depicts a married couple beginning retirement with $2 million in savings, and after applying the 4% rule, having roughly $2.6 million in savings 30 years later.1

That’s right, they end up with more money than they started with.

This example accounts annually for: 2.5% inflation, 6% portfolio growth and 4% income withdrawal, with the couple starting retirement on January 1 and withdrawing $80,000 for the year.

4% withdrawal rule chart
1This is a hypothetical example, simplified for illustration purposes. The ending values do not reflect taxes, investment costs or expenses.

Generally speaking, when you use the annual 4% sustainable withdrawal rate, you likely won’t run out of money in retirement.

Deep Dive: See Fidelity’s comprehensive explanation of the 4% withdrawal rule.

Step #2—Include the Retirement “Smile” Spending Changes

In reality, most retirees spend similar to the retirement smile.

Specifically, spending is higher in initial retirement years, dips during middle years and then increases again in later years.

Simple Example:

Many retirees spend extra on travel during early retirement. Then as you age travel drops off, while health care spending grows.

Up, down, up = smile.

Retirement Smile Spending Chart
Retirement Smile
Image created using Microsoft’s AI image creator.

Continuing the 4% rule example above, the couple would withdraw at least $80,000 from savings each year to cover their expenses.

However, this number isn’t always reflective of reality.

Some years the couple’s withdrawal rate may need to be higher, perhaps $120,000.

Why?

Because hot water heaters break, pool liners tear, vehicles become unreliable and adult children sometimes ask for loans.

We can budget (links to/downloads our budgeting worksheet) till we’re blue in the face and we should! But, life happens.

Therefore, to help make your retirement savings last, consider how spending changes throughout retirement.

Step #3—Apply Sophisticated Financial Modeling Guardrails

There’s a popular myth about retirement.

Specifically, many retirees believe stock market performance could cause them to run out of money.

This isn’t likely true.

Instead, your greatest financial risk is generally longevity risk.

Stock market risk can be greatly reduced by how your portfolio is constructed.

For Example:

The market generally falls about 14% in a given year and bounces back, and one out of five years it typically drops up to 30% for a period.

We help protect you from these fluctuations during retirement by putting about two-to-three years of money aside (cash-like investments still earning interest), so you’re not selling during a down market to fund living expenses.

Managing longevity risk, however, requires sophisticated financial modeling to help reduce the possibility of running out of money in retirement.

Our team uses several financial modeling programs to help you understand what you can spend each year during retirement without running out of money.

One key feature is the ability to apply “guardrails” that show how your money performs during both up and down years.

Ultimately, we stress test your money by applying different scenarios, e.g., retiring during the 2007 financial crisis.

The goal is to keep your spending within the guardrails. Ultimately, your annual “paycheck” may fluctuate some year to year.

Here’s one program in action, using the couple’s $2 million:

The following graph depicts upper (green) and lower (red) guardrails with the couple’s portfolio balance in blue.

Each vertical line shows an intersection whereby the couple can withdraw more than their annual $80,000.

How are the guardrails set?

Our goal is to keep you from hitting the red guardrail.

Therefore, when establishing your unique guardrails we consider your age, goals, health, risk tolerance and how much money you have, while also putting aside a couple years of spending so we don’t have to invade the portfolio during market down years.

In general, we construct your portfolio to stay in between the market’s highs and lows.

We also use historical data to drive the highs and lows. (It goes without saying we don’t know what the future holds.)

Your Money Outliving You Using Financial Modeling Guardrails
Modeling Program: Income Lab

As you can see, there’s a lot going on here, including establishing guardrails and spending limits based on unknown longevity.

Reach out anytime to discuss. We’re happy to show you various retirement withdrawal scenarios using your unique guardrails.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Cautiously Optimistic: Three 2024 Financial Projections

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Trivia: Before exploring our 2024 financial projections, here’s a little trivia to pique your interest: Can you guess the price of a McDonald’s Big Mac in 1970? (See answer below.)

Your financial horizon is bright! Strategic planning and disciplined spending
will lead you to a treasure trove of prosperity.

Today, we’re concluding the year with three 2024 financial projections.

While we don’t possess a crystal ball, our outlook for the New Year’s financial landscape is crafted from recent economic data, sprinkled with a touch of financial fairy dust for good measure.

Brief 2023 Reflection

Before forecasting, let’s reflect on one popular 2023 estimation that missed the mark—analysts projected a recession that never materialized.

Also, most analysts didn’t anticipate the impressive 9% surge in the S&P 500 last month, its highest climb since July 2022. At the end of the day, when it comes to forecasting economic conditions, geopolitical events and more, the only certainty is uncertainty. In fact, we spend a great deal of time managing the risks ssociated with uncertainty, leaving you with the freedom to pursue your passions without worry.

Projection #1—Interest Rates Fall Late 2024

It’s likely interest rates will remain the same well into 2024.

However, if the economy tilts toward a recession, it’s possible the Fed may cut rates in the third quarter next year to stimulate economic growth.

Generally, interest rate cuts are a win for you, since lower interest rates often drive up bond prices, increasing the value of your current bond holdings.

Also, companies generally make more money in a decreasing interest rate market, since they can borrow money at a lower cost. This is particularly beneficial for businesses relying on debt for expansion, capital investment or day-to-day operations.

Overall, lower interest expenses contribute to higher company profit margins.

Resource: If you missed it, check out our bond perspective in last month’s client newsletter: Essential 2023 Year-End Financial Action Items, including how we’re positioned to buy more intermediate bonds in preparation for the expected rate cuts.

Good News!

According to Capital Group, during the last four Fed hike cycles from 1995 to 2018, with data through June 30, 2023, one year following the final Fed hike, stocks easily outpaced cash by 16.2%.

Source: Capital Group Economic Indicators

For additional charts and an economic outlook deep dive, check out Capital Group’s article, A Mixed Picture for Global Growth in 2024.

Projection #2—Inflation Will (Slowly) Fall

The current inflation rate is about 3.25%, down sharply from its 9.1% high in June 2022.

However, the Fed wants the inflation rate lower (around 2%).

Why? Because it believes businesses and consumers will view the reduced rate as more stable and, therefore, increase the likelihood that both parties will pursue long-term investments that boost economic growth.

We predict inflation will fall some.

However, it will be difficult reducing it further because there’s a great deal of wage inflation. Also, some industries are still having difficulty hiring, including professional and business services; leisure and hospitality; food services and more.

For Example:

According to a recent U.S. Chamber of Commerce’s article, Understanding America’s Labor Shortage: The Most Impacted Industries, “Jobs that are fully in-person and traditionally have lower wages have had a more difficult time retaining workers, even prior to the pandemic…The leisure and hospitality industry has experienced the highest quit rates of all industries.”

Projection #3—Food Prices Will Continue To Rise

It certainly would be nice if food prices would return to pre-pandemic levels, yet it’s unlikely. Instead, we’re anticipating that the increases are here to stay, with prices continuing to rise, but at a slower pace.

Earlier this year, we discussed grocery pricing truths. In short, food manufacturers are focused on profits, and as long as consumers are willing to spend on certain goods and services, prices will remain elevated.

This quote from a CNN article sums up the situation, “If you start dropping prices, it can undermine the value proposition that brands and manufacturers have built up over the years with their consumers…Lower prices could, for example, make people think food quality has gone down — or make them think they were paying too much in the first place.”

Also, the USDA is forecasting a 2.9% increase in food prices for 2024.

Your Portfolio

Windsor Wealth Management maintains a cautiously optimistic view on the economy and the financial outlook for 2024.

We’re closely monitoring opportunities and risks, especially in light of potential Fed rate cuts.

Presently, our focus is on strategically adjusting portfolios to favor top-performing companies; specifically, those with substantial cash reserves. Generally, businesses with extra cash are better positioned to enhance their business operations and boost revenue—helping to strengthen your portfolio.

Wishing You a Wonderful Holiday Season

Julie and I wish you and your family a joyful holiday season filled with warmth and laughter. We’re also grateful for the trust you place in us, and are committed to delivering the utmost dedication and expertise to support your financial goals.

Here’s to a wonderful year ahead!

Happy Holidays,

Dave

Trivia Answer: 65 Cents (Today, the average price of a Big Mac meal is $6.05.)

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Essential 2023 Year-End Financial Action Items

by

Before delving into finances, let’s kick things off with a Thanksgiving riddle (see answer below):

I’m round and golden, a symbol of the feast,

On Thanksgiving Day, I’m served with the turkey, at least.

With stuffing inside, I’m a savory delight,

What am I, on this special night?

Year-End-Financial-Planning

Celebrating the Season with Gratitude

Today’s Discussion Includes:

  • Important year-end action items for your consideration.
  • A handy and visually pleasing Key Financial Data spreadsheet that includes 2023 tax brackets, retirement contribution limits, Medicare and Social Security thresholds and more.
  • Bonds and your investment portfolio.

Key Year-End Action Items

The end of the year is fast approaching. (Can someone please hit the pause button?!)

Therefore, remember to address the following financial items by December 31:

Retirement Plan Contributions: Help reduce your 2023 tax obligations and strengthen your retirement readiness by maximizing your retirement plan contributions.

This year, individuals 50 and younger may contribute up to $22,500, while those 50 and older can contribute up to $30,000.

Charitable Contributions: You can make a tax-deductible charitable donation for the tax year 2023 until December 31, 2023. To qualify, you’ll need to itemize your deductions using Form 1040, Schedule A. This option is applicable when your itemized deductions exceed the standard deduction.

In the 2023 tax year, the standard deductions are:

  • Married couples filing jointly: $27,700
  • Single taxpayers and married individuals filing separately: $13,850
  • Heads of households: $20,800

Also, many employers have matching gift programs, typically matching a certain percentage of your charitable donation. This is a great way to double your impact for organizations you cherish.

Check out our useful and easy-on-the-eyes Key Financial Data spreadsheet. It includes 2023 tax brackets, standard deductions, retirement plans and IRA contribution limits, Medicare deductibles and premiums, Social Security taxable income brackets and more. Feel free to share this handy resource with your friends; knowledge is a great gift.

Qualified Charitable Distributions (QCDs)

For those age 70½ and older, you can donate funds from your IRA or Roth IRA directly to eligible charitable organizations.

When you make a QCD, the distributed funds are excluded from your taxable income.

This means you don’t have to pay income tax on the amount donated directly to a qualified charity, and the distribution could satisfy your Required Minimum Distribution (RMD) for the year.

To ensure a QCD counts toward your RMD for 2023, the funds must be withdrawn from your IRA before your RMD deadline, typically December 31 of each year.

Resource: Fidelity discusses the ins and outs of QCDs in this article, Donating to a Charity Using a Qualified Charitable Distribution (QCD).

Tax-Loss Harvesting

During year-end, we review each client’s taxable accounts one-by-one seeking tax-loss harvesting opportunities, i.e., turning lemons into lemonade by selling investments that lost value to offset capital gains from other investments, helping to lower your tax obligation.

Therefore, it’s critical to alert us to investments you hold elsewhere so we can work in concert with these assets, ultimately optimizing your tax situation.

Your Investment Portfolio and Bonds

We’ve been closely monitoring the bond market and the Fed’s potential rate cuts expected late next year.

Most recently, interest rates have been unchanged during the Fed’s last two meetings (following 11 consecutive increases since March 2022) due to signs of a slowing economy.

However, if the economy slows too much, the Fed will likely cut interest rates to stimulate economic activity.

Buying Bonds

When the Fed cuts rates, bond prices generally increase. To take advantage of this (potential) increase, we’re positioned to buy more intermediate bonds in preparation for the expected rate cuts.

Said differently: When the Fed decides to lower interest rates, the market typically responds by making bonds more attractive to investors. This increased demand for bonds tends to drive their prices higher, which can be advantageous for those who already hold these bonds.

The longer we wait for more clarity on the Fed’s actions, the more we may consider adding additional funds to intermediate bonds. In short, we’re positioning ourselves to help you benefit from the anticipated increase in bond prices if/when the Fed initiates its rate cuts.

Celebrating the Season with Gratitude

During this season of gratitude, Julie and I want to extend our warmest thanks to you for your continued trust and partnership.

Your confidence in our services is a source of inspiration, and we’re grateful for the opportunity to assist you in achieving your financial goals.

Financial Advisor North of Boston
Julie Doyle and David Bunker, Windsor Wealth Management
Concerns or Questions

Please reach out with any questions or concerns.

Happy Thanksgiving,

–David Bunker, Financial Advisor & Fiduciary

Pumpkin Pie

Riddle Answer: Pumpkin Pie

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.