FMI MARKET COMMENTARY
The FMI Market Commentary is intended to deliver advice and insights centered around our economy, markets, and investment issues at this time.  It is our goal to bring you timely and valuable ideas, updates, concepts, and strategies to help you in your quest for financial security and independence.  Please feel free to contact us regarding questions you have or the specific application to your situation.
 
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-Financial Management, Inc.
In This Issue
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Key Retirement and Tax Numbers for 2019

Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans and various tax deduction, exclusion, exemption, and threshold amounts. 

The combined annual limit on contributions to traditional and Roth IRAs increased to $6,000 in 2019 (up from $5,500 in 2018), with individuals age 50 and older able to contribute an additional $1,000. For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is phased out for the following modified adjusted gross income (AGI) ranges:



Note: The 2019 phaseout range is $193,000 - $203,000 (up from $189,000 - $199,000 in 2018) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered.

The modified AGI phaseout ranges for individuals to make contributions to a Roth IRA are:




Estate and gift tax
  • The annual gift tax exclusion for 2019 is $15,000, the same as in 2018.
  • The gift and estate tax basic exclusion amount for 2019 is $11,400,000, up from $11,180,000 in 2018.
Kiddie tax 

Under the kiddie tax rules, unearned income above $2,200 in 2019 (up from $2,100 in 2018) is taxed using the trust and estate income tax brackets. The kiddie tax rules apply to: (1) those under age 18, (2) those age 18 whose earned income doesn't exceed one-half of their support, and (3) those ages 19 to 23 who are full-time students and whose earned income doesn't exceed one-half of their support.

Standard deduction

 
Note:
The additional standard deduction amount for the blind or aged (age 65 or older) in 2019 is $1,650 (up from $1,600 in 2018) for single/HOH or $1,300 (the same as in 2018) for all other filing statuses. Special rules apply if you can be claimed as a dependent by another taxpayer.

Alternative minimum tax (AMT)




For more information click on this link:






Hybrid Funds: Balanced, Lifestyle or Target?
Holding a mix of stocks and bonds is fundamental to building a portfolio that can pursue growth while potentially remaining more stable than a stock-only portfolio during market downturns. Many investors approach this goal by owning a mix of individual securities, a mix of funds, or both. However, some hybrid funds try to follow the same strategy in a single investment.
Although the goal of these funds is simplicity, they are not as simple as they may appear, and different types of hybrid funds have very different objectives.

Balanced funds

Balanced funds typically strive for a specific asset mix - for example, 60% stocks and 40% bonds - but the balance might vary within limits spelled out in the prospectus. Theoretically, the stocks in the fund provide the potential for gains while the bonds may help reduce the effects of market volatility.
Generally, balanced funds have three objectives: conserve principal, provide income, and pursue long-term growth. Of course, there is no guarantee that a fund will meet its objectives. If you are investing in a balanced fund or considering whether to do so, you should understand the fund's asset mix, objectives, and rebalancing guidelines as the asset mix changes due to market performance. Rebalancing is typically necessary to keep a balanced fund on track, but could create a taxable event for investors.

Lifestyle funds

Lifestyle funds, also called target-risk funds, include a mix of assets designed to maintain a consistent level of risk. These funds may be labeled with terms such as conservative, moderate, or aggressive. Because the targeted risk level remains consistent over time, you may want to shift assets from one lifestyle fund to another as you approach retirement or retire. A conservative lifestyle fund might be an appropriate holding throughout retirement.

Target-date funds

Target-date funds contain a mix of assets selected for a specific time horizon. The target date, usually included in the fund's name, is the approximate date when an investor would withdraw money for retirement or another purpose, such as paying for college. An investor expecting to retire in 2035, for example, might choose a 2035 fund. As the target date approaches, the fund typically shifts toward a more conservative asset allocation to help conserve the value it may have accumulated. This transition is driven by a formula called the glide path, which determines how the asset mix will change over time. The glide path may end at the target date or continue to shift assets beyond the target date.

Funds with the same target date may vary not only in their glide path but also in the underlying asset allocation, investment holdings, turnover rate, fees, and fund performance. Variation tends to be greater as funds near their target date. If you own a target-date fund and are nearing the target date, be sure you understand the asset mix and whether the glide path extends beyond the target date.

All in one?

Traditional balanced funds typically contain a mix of individual securities. Although these funds may be an appropriate core holding for a diversified portfolio, they are generally not intended to be an investor's only holding. However, some balanced funds and most lifestyle and target-date funds include a mix of other funds. These "funds of funds" are often intended to offer an all-in-one portfolio investment. You may still want to hold other investments, but keep in mind that investing outside of an all-in-one fund may change your overall asset allocation. Asset allocation and diversification are widely accepted methods to help manage investment risk; they do not guarantee a profit or protect against investment loss.

Additional considerations

The principal value of a target-date fund is not guaranteed before, on, or after the target date. There is no guarantee that you will be prepared for retirement on the target date or that any fund will meet its stated goals. The return and principal value of all funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.


 


What Happened to Your Money?
If you don't know what happened to your money during the past year, it's time to find out. December and January are the perfect months to look back at what you earned, saved, and spent, as W-2s, account statements, and other year-end financial summaries roll in.

How much have you saved?
  
If you resolved last year to save more or you set a specific financial goal (for example, saving 15% of your income for retirement), did you accomplish your objective? Start by taking a look at your account balances. How much did you save for college or retirement? Were you able to increase your emergency fund? If you were saving for a large purchase, did you save as much as you expected?

How did your investments perform?
  
Review any investment statements you've received. How have your investments performed in comparison to general market conditions, against industry benchmarks, and in relationship to your expectations and needs? Do you need to make any adjustments based on your own circumstances, your tolerance for risk, or because of market conditions?

Did you reduce debt?
  
Tracking your spending is just as important as tracking your savings, but it's hard to do when you're caught up in an endless cycle of paying down your debt and then borrowing more money. Fortunately, end-of-year mortgage statements, credit card statements, and vehicle financing statements will all spell out the amount of debt you still owe and how much you've really been able to pay off. You may even find that you're making more progress than you think. Keep these paper or online statements so you have an easy way to track your progress next year.

Where did your employment taxes go?
  
If you're covered by Social Security, the W-2 you receive from your employer by the end of January will show how much you paid into the Social Security system via payroll (FICA) taxes collected. If you're self-employed, you report and pay these taxes (called self-employment taxes) yourself. FICA taxes help fund future Social Security benefits, including retirement, disability, and survivor benefits, but many people have no idea what they can expect to receive from Social Security in the future.

This year, get in the habit of checking your Social Security Statement annually to find out how much you've been contributing to the Social Security system and what future benefits you might expect, based on current law. To access your Statement, sign up for a  my Social Security account at the Social Security Administration website,  socialsecurity.gov.

Did your finances improve?
  
Once you've reviewed your account balances and financial statements, your next step is to look at your whole financial picture. Taking into account your income, your savings and investments, and your debt load, did your finances improve over the course of the year? If not, why not?

Next, it's time to think about the changes you would like to make for next year. Start by considering the following questions:
  • What are your greatest financial concerns?
  • Do you need help or advice in certain areas?
  • Are your financial goals the same as they were last year?
  • Do you need to revise your budget now that you've reviewed what you've earned, saved, and spent?
Use what you've learned about your finances to set your course for the new year ahead. Challenge yourself to save more and spend less so that you can make steady financial progress.

About Financial Management Inc.
Selecting a financial advisor is one of the most important financial decisions you will ever make. I have included information on the characteristics of highly qualified financial professionals for better clarity. Working with an independent financial advisor who has experience and education backed by professional credentials such as CFP®, ChFC, MBA, or RFC® that they work on a "fee" basis to offer you objective advice.
 
A "fee-based" advisor works in your best interest because the value of your account affects their compensation.     
 
A credentialed advisor is bound by a "Code of Ethics" and is trained in risk management, investment analysis and allocation, retirement and estate planning, cash flow and debt management, as well as tax issues. The difference is knowledge and expertise to understand how doing something in one part of your financial world, impacts another. This gives you the advantage of comprehensive integration of all your financial information.
 
Registered investment advisors are registered with their state or the Securities Exchange Commission (SEC). 
  
A registered investment advisor is required by law to provide full disclosure of compensation, education, history of complaints, and conflicts of interest. 
 
All this provides you with comfort of knowing that Financial Management, Inc....Our Solution!


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