This past weekend, my fiancé, Mark, and I were casually sipping coffee at Starbucks, and I began to reflect on the last year. A year ago, I moved from Orlando, FL to Casper, WY to further my career as a Financial Advisor, becoming partners with Mandy and working alongside her full-time. In a short time, Casper brought me Mark (we met a couple months after my move and are getting married this August), a house (we bought a home on the east side in December), and a greater appreciation for family and friends (I left quite a few people behind when I moved here solo). One of my greatest passions as a Financial Advisor is walking alongside clients on their journey and providing wisdom to assist. To honor my year-anniversary in Casper, I am resuming my coffee talks blog. I started this quarterly blog when I was an advisor in Orlando as a way for my clients to glean financial health and wellness wisdom and hear more about what I am up to personally and professionally. I hope you enjoy the next edition of Courtney’s Coffee Talks.
I can barely take one sip of my coffee in the morning before my mom is calling me asking about floral arrangements and napkin colors. Mark and I decided earlier this year to get married this August and ever since, I haven’t been able to escape the wedding planning obligations, even though my honorary wedding planner (mom) is 2,200 miles away. Between planning a destination (Florida) wedding, helping Mandy around the office, managing our household, preparing for a new puppy, and trying to find us a coed softball team for the summer, I’ll admit my plate is pretty full, and I’ve had to prioritize managing my stress more than usual lately. With current global conditions, I imagine all of us are slightly more stressed and on edge, after an already tough couple of years as we dealt with COVID-19. Here are some tips to manage your financial worries, and if you have any wedding stress-relief tips, I am all ears.
Cut out the noise.
Your family, friends, the news, and people you overhear across a restaurant all have an opinion on the current events, regardless of whether the current events happen to be positive or negative I might add. Remember that each of these parties is “in the trenches” with whatever short-term, current event is taking place, and they are likely losing the long-term perspective that you and I have for your finances. Ignore the noise and focus on what you control.
Consider a Roth Conversion.*
A Roth conversion involves recognizing taxes on a portion or all of your pre-tax dollars. While you will pay taxes at the time of conversion, once converted it leads to tax-free wealth accumulation because there are no taxes on qualified distributions from a Roth IRA. There are many benefits to Roth conversions, regardless of market outlook, including protecting the converted dollars from future income tax rate increases, eliminating RMD requirements on the converted dollars, and leaving heirs a tax-free inheritance. Converting long-term, pre-tax IRA dollars today at a lower value to avoid future taxes on a potentially higher value is a great reason to consider doing a Roth conversion during times of a market correction or pullback. However, a Roth conversion is not simple by any means. You will want to review with your CPA to determine tax consequences on your conversion and to make sure your Roth conversion doesn’t end up causing a tax bill surprise. There are also no guarantees on the market performance, so your converted dollars should still have a long-term investment objective.
Consider Investing More.
During a market pullback, a lot of stocks are priced cheaper than their recent all-time highs so market pullbacks can be a great opportunity to put some dollars to work at a lower cost. I compare this to shopping at the mall and finding your favorite jeans are on sale. Most people would consider buying another pair of jeans to lock in the discount. The dollars being invested still need to have a long-term objective because no one knows for sure how long each volatile market is going to last, and performance is not guaranteed. We can help implement strategies like dollar-cost averaging to hedge against the market decreasing further.
Lean into your experts.
We are here for your investment and financial planning needs. We are also staying up to date on the current global situation so that we can pass that information along to you. Read the market recaps, and tune into the webinars to help alleviate the fear of unknown. Schedule an appointment so that we can discuss your long-term goals and objectives and educate you on how your accounts align with your goals. Don’t know where to start on paying off your debt? We can help with this too. We are your team of experts, we are your sounding board, and together, we will all get through this.
*Unless certain criteria are met, Roth IRA owners must be 591/2 or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a Traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Any opinions are those of Courtney Wood and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. No investment strategy can guarantee your objectives will be met. Prior to making an investment decision, please consult with your financial advisor about your individual situation.