If you’ve filed your taxes already or are on extension and have been reviewing your numbers, take this opportunity to improve your finances with help from two articles this week. Read why underspending in retirement is an understated risk and how you can avoid it. See why analysts aren’t concerned with the consumer, market, and overall economy despite sentiment being so poor.
This Week’s Takeaways:
- Sticking to a safe withdrawal rate during retirement can easily cause you to underspend in retirement and see your wealth increase versus just paying for a comfortable retirement. Setting personal goals can motivate you to avoid this situation and get comfortable with spending.
- Donating to charity directly from your IRA after 70.5 reduces your taxable income and helps save on taxes in other indirect ways.
- The U.S. consumer is still going strong despite higher gas prices, stubborn inflation, and poor consumer sentiment.
- Housing continues to be a mixed bag depending on where you are in the country. The Sun Belt should see prices soften the most in the next year, but nationally that will be offset by strength in the Northeast and Midwest.
- Professor Siegel believes the current environment sets up well for stocks and the economy, despite challenges from gas prices and higher rates.
- Filing your taxes is a good prompt to revisit withholding, retirement contributions, Roth conversion opportunities, and your charitable giving strategy.
- Latest Boston Corner summarizes the Beige Book report by the Boston Fed and highlights strenghts and weaknesses in the regional economy.
Is Your Cautious Retirement Spending Doing More Harm Than Good? by Morningstar
For some retirees, underspending their retirement savings is a bigger problem than overspending. Many retirees see their wealth increase during retirement and underspend relative to how much they could spend safely. This typically happens when you use a “safe withdrawal rate” to determine your spending. Setting personal goals can motivate you to spend more as you pursue them in retirement.
See also: my book review of Die with Zero
A way to give to charity that can help reduce taxes by Vanguard
After age 70½, writing a check usually isn’t the most tax‑efficient way to support a favorite charity. Qualified charitable distributions (QCDs) allow eligible investors to give directly from an IRA to a qualified charity—and reduce their tax bill in the process. By keeping those dollars out of reported income, QCDs can help reduce the taxation of Social Security benefits, limit exposure to income‑based Medicare surcharges, and avoid other tax‑related costs.
The Daily: Warsh’s Forward Guidance and a Still Resilient Consumer by Wells Fargo
Higher gas prices and stubborn inflation could cause investors to be nervous about consumer spending, but this latest report shows that the consumer has stayed resilient through March and credit card spending through mid-April shows a sturdy pace of spending. This could change if the conflict (and associated higher prices) persists, but for now, it’s not showing up in the data.
Zillow revises its home price forecast across over 400 housing markets—see the map by ResiClub
Zillow projects national residential real estate prices to stay flat for the next year, which would improve affordability given rising that U.S. income growth would then outpace home price growth. This is a slight downgrade to their prior outlook. Regionally, the Northeast and Midwest will see stronger price appreciation, while the Sun Belt will be the softest.
Peace Setback, but Liquidity and War Spending Lift Equities by Professor Jeremy Siegel
The stock market is exhibiting classic bullish behavior by rebounding stronger than the declines after bad news. Gas prices will settle out higher, but it won’t be enough to derail the consumer, while money supply growth and higher defense spending provide tailwinds. Professor Siegel believes this is an environment that is good for stocks with hard data that doesn’t support recession concerns.
Now That You’ve Filed Your Taxes, What Should You Do Next? by Savant Wealth
There are several things you should revisit after filing your taxes to improve your financial situation, such as understanding where your income came from and how it was taxed, revisiting withholding levels and estimated payments, increasing retirement contributions if necessary, considering Roth conversions, and improving the tax treatment of your charitable contributions.
Book Recommendation
Midnight in the Garden of Good and Evil by John Berendt
This isn’t a new book, but the 30th anniversary edition contains a new afterword by the author. This is the non-fiction book that put Savannah tourism back on the map, while also serving as a true crime classic.
Boston Corner
The Beige Book – First District by Federal Reserve Bank of Boston
The Beige Book is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. The April 15 report shows that economic activity declined slightly, led by weaker real estate. Consumer spending stayed the same, manufacturing and nonfinancial services improved, and commercial real estate was flat.
