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Objective Financial Advice
Dear Jean,

Welcome to 2023! With a challenging 2022 in the investment markets behind us, this year has started out on a brighter note. Bloomberg’s US Aggregate bond index gained 2.6% in the first 2 weeks of the year because of market-driven drops in interest rates, and the S&P 500 is up more than 4%*. Of course, we need to keep in mind that short-term market movements are not cause for excitement or concern. Stock and bond prices fluctuate significantly in the short-term as investors attempt to respond to economic data and adjust their forecasts accordingly. As long-term investors, it’s helpful for us to tune out this noise.

 

Since it's a new year, it's a good time to review your retirement plan contributions. The maximum regular 401(k) contribution for this year is increased to $22,500. The catch-up is $7,500 for those 50+ making the total potential contribution $30,000. You can start making the catch-up in the year you turn 50 even if your birthday is the very last day of the year. The maximum IRA contribution (Roth or traditional) is $6,500 this year with a $1,000 available catch-up. More limits are available on the IRS website.


Tax documents for 2022 have started to arrive. We recommend making a list of all of your taxable investment accounts and any retirement plan from which you took a distribution in 2022. You should receive a 1099 for each one of these. They may arrive in your physical mailbox, or you may receive an email from your custodian asking you to download the form. Prior to submitting your documents to your tax preparer, you can cross-reference your list to make sure you have each expected 1099. Failing to include a 1099 is one of the most common errors we see on client tax returns, and it will result in an unpleasant letter from the IRS.

 

You’ve probably heard about the large omnibus bill that passed at the end of 2022 called Secure 2.0. There is probably something in this new law that affects your financial planning. We have highlights below.


Please read on for other actionable planning ideas and a full review of the 2022 investment markets. We will be closed for Presidents' Day (Monday, February 20th) and Good Friday (April 7th). We plan to send the next newsletter out in mid-April. We'd love to hear from you on questions or suggestions for topics you’d like to see covered in the

future. We've included photos of some of our team members throughout the newsletter so you can see us in action and get to know us better.


*Source for investment returns is Morningstar as of January 17, 2023. S&P 500 TR USD for S&P 500. Bloomberg US Agg Bond TR USD for the US aggregate bond index.

How SECURE Act 2.0 Affects Your Financial Plan

Jean, Geselle

Three years after the SECURE Act was enacted, SECURE Act 2.0. passed at the end of last year. Here are some of the highlights and opportunities.


RMDs and QCDs


If your 72nd birthday happens to occur in 2023, lucky you! You benefit from the required minimum distribution (RMD) age being raised from 72 to 73. Though not a big change, this does encompass individuals born in the years 1951 - 1959. If you were born in 1960 or later, your RMD age is now 75. There is currently no 74 RMD age. It's either 73, 75, or if you were already taking your RMDs, keep doing what you're doing.


If you've been making or have been looking forward to making qualified charitable distributions (QCDs) from your IRA before you have to take RMDs, you're still able to start this up at age 70 1/2.


All the Tax-Free (Roth) Stuff


There was no change to backdoor Roth contributions. If this strategy was smart for you before, you can continue with it.


Do you have Roth money in an employer plan? You can now keep it there after age 72 without having to take RMDs.


We've seen the growing popularity of the Roth 401k. Though not required, employers are now able to contribute to the Roth portion of an employee's retirement plan. You may start to see other Roth employer plan options pop up as SEP and SIMPLE IRAs now have this capability. These items may take some time as employers and administrators navigate these changes.


Individuals with wages over $145,000 (earned in the prior year at the same employer) will only be able to make a catch-up contribution to their 401k, 403b, or 457b as a Roth contribution. Pre-tax (traditional) catch-up contributions for the $145K+ group will no longer be permitted. This takes effect in 2024.


Overfunded 529?


Starting in 2024, funds in a 529 can be transferred to a Roth IRA in the name of the 529 plan's beneficiary if the 529 was maintained for 15+ years with the exception of contributions (and earnings) made over the last 5 years. The annual transfer that can be done is the same as that individual's own IRA contribution limit. For example, if the beneficiary has already maxed out an IRA or Roth IRA for the year, this transfer cannot be completed in the same year. There is also a maximum lifetime transfer of $35,000 to an individual. While it seems like a bunch of hoops to jump through, this could turn into a jumpstart for the beneficiary's retirement savings without that pesky 10% penalty.


Concluding Thoughts


We are still in the early days of the 2.0 rollout and will likely see additional guidance and clarification. What we've mentioned here are just some of the most key changes. For more details, we recommend reviewing Jeffrey Levine's in-depth article on Kitces.com.

Even More Updates on Student Loan Repayment

Steven Myers, Megan Coyne, Rachel Songer

While last year's student loan forgiveness proposal is currently stalled in the courts, the payment pause has been extended once again. Payments will begin again either on June 30, 2023 or 60 days after the Supreme Court's verdict on the cases they're to hear beginning next month.


The Department of Education recently rolled out a proposal to lower payments on one income-driven plan for federal loans. The new minimum payment would drop from 10% of discretionary income to 5%. If this proposal is adopted, this offering could be available next summer.


If you've been struggling to find the balance between paying off your student loans and saving for retirement, the SECURE Act 2.0 does provide some assistance. Starting in 2024, employers can start matching your student loan payments in retirement plans. This means you could be eligible to receive your company's match without making a contribution to the retirement plan yourself.

Investment Market Update

Congratulations on making it through a difficult investment year! Investors in a diversified stock/bond portfolio who stayed the course throughout the year were rewarded with a positive quarter to end the year.

 

The S&P 500 was up 7.56% last quarter coming in at -18.11% for 2022. Small cap stocks were up slightly less this quarter at 6.23% and lagged behind the S&P 500 at -20.44% for last year. Large cap value stocks came roaring back last quarter at 12.42%. Though not enough to negate the prior quarters' losses, they certainly lost the least of the U.S. stock funds at -7.54% for 2022. These are index returns and individual fund performance for these asset classes varied.

 

Developed market stock was our top performer last quarter at 17.34%, more than doubling the S&P 500 and pulling ahead for the year with a -14.45% loss. You may note that international developed stocks outperformed large cap US for the calendar year of 2022, which is a nice reward for patient investors who have stuck with international stocks through some challenging years. Emerging markets stock also outpaced the S&P 500 at 9.7% for the quarter. It did, however, have a larger loss at 20.09% for the year.

 

The US aggregate bond index made 1.87% for the quarter bringing the loss for 2022 down to -13.01%. Shorter-term bond funds were up .73% for the quarter with an annual loss of -3.81%. While we don't know what 2023 holds for bond funds, we can confidently say that they are positioned to be a much more positive contributor to your portfolio now than they were a year ago because of higher interest rates.


There have been some media headlines about the "failure" of the 60/40 portfolio last year. As we know, there's no guarantee that stocks and bonds will always move in opposite directions. As we saw last year, when interest rates increase, bond prices must fall. And, when stocks are also dropping because of concerns about inflation, rising interest rates, and other issues, seeing both types of assets drop in value is expected. It's not a failure, but a reminder that investing involves risk. To benefit from the long-term returns of the investment markets, we need to be willing to tolerate these ups and down. We find the WSJ's Jason Zweig's perspective on the 60/40 portfolio helpful.


If you'd like to read more about the markets, Dimensional Funds offers an in-depth review of the 2022 markets and a look ahead.


If you'd like to see more perspective on how markets react during a recession, we find this one-sheet helpful.


**Source for investment returns is Morningstar as of December 31, 2022. S&P 500 TR USD for S&P 500. Russell 2000 TR USD for small cap stock. Russell 1000 Value TR USD for large value stocks. MSCI EAFE NR USD for developed international markets. MSCI EM NR USD for emerging markets stock. Bloomberg US Agg Bond TR USD for the US aggregate bond index. Bloomberg US Government 1-3 Yr TR USD for short-term bonds.

Team News

Both Trista Jacobs and Steven Myers are delighted to report that they successfully passed the CFP ® exam in 2022. In addition, Trista got her CPA* license activated and transferred to Texas.


As you may know, the Certified Financial Planner(TM) exam is no joke. It's a 6-hour ordeal that both of them spent months preparing for after completing the educational coursework for the credential. Congratulations to both of them!


Thomas Warkins, Operations Associate, graduated from UNT with a BBA in finance with a minor in financial planning this December. Congratulations to Thomas!


You can see more about the backgrounds of Trista, Steven, and Thomas on the Meet Our Team page.


We're also happy to announced that Keener Financial Planning was once again named one of D Magazine's Top Wealth Managers for 2022. Patty Priddy and Jean Keener were also recognized on the Best Financial Planners list. You can read all about it on our website.


*Keener Financial Planning is not a CPA firm.

 

Meet the Ops Team

When you call to schedule an appointment, send in materials, receive forms to sign for your custodian, and so many more things, you are working with our Ops team. Featured left to right are Director of Operations Kelli Hinton, Administrate Assistant Catherine Mueller, and Operations Associate Thomas Warkins. We so appreciate their outstanding efforts at helping our team run smoothly!

Kelli, Catherine, Thomas
Address:
1692 Keller Parkway
Keller, TX 76248
Ph: 817-993-0401
Fax: 817-993-0002
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