October 2022
By Mark FisselPosted on October 18th, 2022
Markets Continue Decline in Q3
from Clint Edgington, CFA
| The Fed’s rate increases are not slowing inflation as quickly as hoped. After remaining flat for a few months, inflation data released in mid-Sept was higher than expected. Core CPI, which excludes energy and food, was up 6.3% from a year ago and 0.6% from the month before. The Market reacted to the data, expecting continued steep Fed rate increases. Gains we saw earlier in the month were quickly wiped out with September ending below June lows. The bear market continues. |
With inflation at a 40-year high, it may feel like doom and gloom. Markets are down from their January peak, costs have soared especially for food and energy. However, there are a few bright spots.
Increase in Federal Income Tax Brackets and the Standard Deduction
We will likely see larger adjustments to the federal income tax brackets for 2023. These are adjusted for inflation on a yearly basis and tied to seven federal income tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Benefits of the Inflation Reduction Act
President Joe Biden signed the Inflation Reduction Act (IRA) into law in August. The bill is a reduced version of the administration’s Build Back Better plan. It aims to reduce health-care costs, fight climate change and shrink the deficit. New spending would be offset by new tax revenue and would reduce the deficit by $305 billion over the next 9 years.
New 401k Lifetime Income Illustrations
Many 401k participants saw, for the first time this year, Lifetime Single Life Annuity Stream illustrations on their quarterly statements. The Secure Act requires that the illustrations be included on statements at least once a year.
The income illustrations have proven to be confusing for many. The monthly payments are shown on statements as both a single life annuity, and as a joint and survivor annuity. The illustration is based on the participant’s current account balance, assumes they are 67 years old and that payments start today. It assumes a rate of return based on the 10-year constant maturity U.S. Treasury securities yield rate.
Retirement Savings in a Volatile Market
If you worry about your retirement investments during market downturns, you’re not alone. Unfortunately, emotions are often the enemy of sound investing. Here are some points to help you stay clear-headed during periods of market volatility.
Markets Rebound
Historically, even the worst bear market has bounced back and eventually gone on to reach new highs. In fact, since 1970, bear markets have lasted an average of 14 months.