Happy New Year and thank you for a great 2023! We appreciate the kind words you’ve shared with us throughout last year, and the many colleagues and friends you’ve sent our way.
Start your 2023 tax prep!
In Today’s Discussion, We:
- Reflect on 2023 and its surprising twist.
- Outline a current portfolio management strategy.
- Emphasize a crucial tool to enhance your retirement budget.
- Share upcoming tax due dates and a cautionary note.
- Urge you to consider two key questions.
- Leave you with something to ponder.
2023 Reflection & Surprising Twist
Last year certainly was a whirlwind, e.g., Silicon Valley Bank failing, federal debt ceiling showdown, grocery prices skyrocketing and more.
Thankfully, recession predictions did not materialize; inflation slowed, enabling the Fed to take a rate-hike break; and the global economy mostly shrugged off geopolitical events, e.g., tensions between the U.S. and China, wars and more.
But, what’s particularly noteworthy, and caught most analysts by surprise, was how the markets finished the year—UP!
Since the start of 2023, the S&P 500 gained 24.2%, and the Nasdaq soared 43.1%, primarily driven by the Magnificent 7’s outstanding performance, including Apple, Microsoft, Amazon, Nvidia (computer component manufacturer), Tesla, Alphabet (Google) and Meta (Facebook/Instagram/Threads).
Your Portfolio
Building on the robust financial gains from the past year, let’s delve into our current portfolio strategy.
Notably, several sectors experienced significant growth last year, e.g., high tech surged 56%, consumer services 52% and consumer cyclicals 39%.
Consequently, we’re proactively rebalancing by securing some early profits and reinvesting strategically to help enhance diversification and restore balance within your portfolio.
Key Tool: Amplify Your Retirement Budget
January is an ideal time to optimize your budget by paying yourself first; specifically, by maximizing your employer-sponsored retirement plans.
At minimum, invest enough to capitalize on your employer’s match.
Overall, try saving at least 15% of your income for retirement.
Resource: Retirement Plan Contribution Limits
As an aside, young adults living with their parents and, therefore, likely benefiting from lower living expenses, should aim to save 50% of their income.
Encourage young adults to save big now, since once they move out of the house and take on other responsibilities, they’ll likely have less money to save.
What’s more, early savings leverage the power of compounding over more years.
Case-in-Point:
Using a Roth IRA Calculator, a 22-year-old starting with a $1,000 balance and contributing $500 monthly, can expect roughly a $1.5 million balance in their Roth account by age 65. (Applying an annual 7% return and 24% marginal tax rate.)
Related Resource: Download our handy budgeting worksheet. Also, feel free to share it with your children, grandchildren and others.
Upcoming Tax Deadlines
If you’re aiming to file your 2023 tax returns early, it’s important to remember that Fidelity typically issues 1099s in late January and early February. However, it’s not uncommon for them to release amendments several weeks later.
The updates primarily result from mutual funds finalizing cost basis, occasionally extending beyond their initial deadlines.
Therefore, you may want to wait a couple weeks after receiving your Fidelity 1099s before filing. Nevertheless, you can still receive an amendment after delaying.
| Important 2023 Tax Deadlines | |
| Jan 31, 2024 | Employers Must Send W-2 Forms |
| Jan 31, 2024 | 1099-Misc and 1099-K Forms for Self-Employed |
| April 15, 2024 | Taxes Due: Final Returns & Payments |
| April 15, 2024 | Last Day for 2023 IRA & HSA Contributions |
| April 15, 2024 | Final Day to File Extension |
| Oct 15, 2024 | Late Filing Deadline |
For self-employed individuals, quarterly estimate deadlines include:
- Q1 2024: 4/15/24
- Q2 2024: 6/17/24
- Q3 2024: 9/16/24
- Q4 2024: 1/15/25
As always, if you need assistance with downloading your Fidelity tax forms, please let us know. We’re happy to help.
2 Key Questions
At the start (and middle) of every year, it’s critical to review our Prolonging Retirement Income Checklist to help ensure you’re on target for a financially strong retirement.
Two key questions to repeatedly ask yourself, include:
#1—Has anything changed in your life, e.g., death, divorce, marriage, etc.?
#2—Are you planning a major event or expense, e.g., business sale, early retirement, home upgrade, wedding, etc.?
If you answer yes, please let us know so we can help you get ahead of potential hidden financial outcomes.
Lastly, Since It’s a New Year, Ponder This…
In the book, Die With Zero: Getting All You Can from Your Money and Your Life, author Bill Perkins writes, “A person’s ability to extract enjoyment from their money begins to decline with age.”
He describes three factors that most affect your ability to enjoy your life; specifically, health, free time and money.
To achieve maximum life fulfillment, Perkins recommendations spending your savings based on “time buckets.” Specifically, focus on your age/health and what you’ll actually be physically capable of doing in the years ahead, i.e., it’s unlikely you’ll ski the Alps at age 95, although it’s possible.
He suggests you draw a timeline of your life from now to the grave (his words, not ours), then divide it into intervals of five or ten years. Each of these intervals—say, from age 30 to 40, or from 70 to 75—is a time bucket. Then think about what key experiences you want to have during your lifetime, and can realistically accomplish based on your age and health.
Ultimately, what experiences will bring you maximum life fulfillment and when will you do them?
Said differently, most retirees have go-go years, then slow-go years, then no-go years.
Please reach out with any questions or concerns.
–David Bunker, Financial Advisor & 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.