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Investors Quarterly Newsletter, Q1 2023 Thumbnail

Investors Quarterly Newsletter, Q1 2023

Investor Insights

In this issue of our Investors Quarterly newsletter, you will learn about:

  • 5 Ways to Improve Your Finances in 2023
  • What to Know About the SECURE Act 2.0 and Its Impact on Your Retirement
  • When to Expect Your 2022 Tax Documents


5 Ways to Improve Your Finances in 2023

With the calendar turning to a new year, U.S. News reports that one of the top Google searches during the last week of 2022 was “money habits to break in 2023”. Getting the financial momentum you need may be easier than expected thanks to a few simple steps. Here are 5 ways to help get your finances on track and working toward your financial goals. 

1) Ensure your emergency fund is where it needs to be

Economic uncertainty clouded much of the outlook to finish 2022, but a solid emergency fund can help better protect your household from financial strain. An emergency fund with three to six months’ worth of living expenses is a good target to consider. If you’re retired, you may want to consider six to twelve months of living expenses as your savings target.

If you don’t have an emergency fund in place yet, start with a smaller goal. Try to set aside $1,000 in a separate account, maybe a savings account that’s easily accessible.

Of course, the point of having an emergency fund is only to use the funds in case of a true emergency. One practice that tends to work well is automating a monthly or bi-monthly transfer from your checking account into your emergency fund. A hundred dollars a month may not seem like much, but you’ll be grateful for a larger emergency fund if your car breaks down or a pipe bursts. Instead of relying on credit cards, you can use that cash to avoid paying interest.  

2) Earn more on your savings  

You may want to look at different options beyond a traditional savings account. DepositAccounts.com reports that the average annual interest rate on savings accounts across many of the largest banks in the U.S. is only 0.268%. In an December 8, 2022 article, the Wall Street Journal reported that customers of the five largest banks in the U.S. would have earned over $42B in additional return on their cash balances in Q3 2022 alone if that same cash was in higher yield accounts at other banks.  

If you want to earn more on your hard-earned savings, there are two options to consider: high-yield savings accounts and treasury bills. High-yield savings accounts are a great place to store your emergency fund as long as you have a timely way to access those funds. Treasury bills are a cash management solution we currently offer our clients with American Portfolios Denver. Treasury bills can be a great place to store additional cash beyond your emergency fund.  

3) Cancel excess subscriptions

How much do you spend on subscriptions each month? Do you really need that gym membership or would a home workout station be a better use of your money? Between Netflix, Disney+, HBO Max, and a plethora of other subscriptions, there’s a high likelihood you’re paying for more subscriptions than you use.  

A simple review of your monthly subscription charges can help give you an idea of where you may be losing money. If there are services you no longer need, take five minutes to cancel those subscriptions today. Even better, after canceling unused subscriptions, think of at least one way you can reclaim that time in a more productive way. Instead of binging just another show or season on a streaming service, what if you used that time to read another book, write a short story, start a new exercise program, or practice meditation?  

The short-term payoff is less expenses, but the long-term payoff in reinvesting that time toward yourself is priceless.  

4) Increase your 401(k) contributions  

As retirement approaches, one of the most important steps that you can take to secure your financial future is to increase your 401(k) contributions. This can allow you to reduce your tax liability, save more for the future, and also take advantage of your employer’s matching contributions.  

To start increasing your 401(k) contributions, first look at how much you're contributing right now. You can then re-evaluate how much you’re contributing each December and January and adjust based on your GlidePath. What’s your GlidePath? It’s part of our proprietary process showing your current financial trajectory (your GlidePath) compared to where you want to land with your financial goals.  

What if you don’t know your current GlidePath? Our team of financial advisors can help you see your current GlidePath and how well you’re aligned (or not aligned) with where you want to be.  

5) Invest in yourself

What’s holding you back from reaching the life you want in 2023? You may be one conversation, one decision, even one new habit away from leveling up your lifestyle. Investing in yourself may be the greatest investment you make in 2023. By developing skills, making new connections, and expanding your knowledge base, you can gain the confidence and momentum you need to reach a new level of fulfillment.  

Speaker and author Eddie Pinero once said, “We invest too much in things that won’t last but invest too little in ourselves which will last forever.” Investing in yourself could also mean taking classes or courses to build up your skill set, learning how to budget and save money wisely, or increasing your network by attending events and conferences in your field. The benefits are great - higher wages, more career options, increased stamina, less stress, greater resiliency when facing challenges, and even better relationships with friends and family.  

In a world with such rapid change and incredible complexity – investing in yourself is key if you want to stay ahead of the game. If you're uncertain where to start with any of these five ways, reach out to our team today. We’re here to help you create a plan that makes sense for your financial future.


What to Know About the Secure Act 2.0 and Its Impact on Your Retirement 

The Setting Every Community Up for Retirement Enhancement Act of 2019, popularly known as the SECURE Act, was signed into law in late 2019. Now called SECURE Act 1.0, it included provisions that raised the requirement for mandatory distributions from retirement accounts and increased access to retirement accounts. However, it didn’t take long for Congress to enhance the landmark bill enacted barely three years ago.

Tucked inside a just-passed 4,155-page, $1.7 trillion spending bill are plenty of provisions, including another overhaul of U.S. retirement laws. Dubbed SECURE Act 2.0, the bill enjoys widespread bipartisan support and builds on SECURE Act 1.0 by strengthening the financial safety net by encouraging Americans to save for retirement.

Here are six key takeaways on SECURE Act 2.0 that may have a dynamic impact on your retirement:

1) Changing the age of the required minimum distributions

Three years ago, the SECURE Act 1.0 increased the age for taking the required minimum distribution (RMD) to 72 years from 70½. If you turn 72 this year, the age required for taking your RMD rises to 73 with SECURE Act 2.0.

If you turned 72 in 2022, you’ll remain on the prior schedule. If you turn 72 in 2023, you may delay your RMD until 2024, when you turn 73. Or you may push back your first RMD to April 1, 2025. Just be aware that you will be required to take two RMDs in 2025, one no later than April 1 and the second no later than December 31. Starting in 2033, the age for the RMD will rise to 75.

Employees enrolled in a Roth 401(k) won’t be required to take RMDs from their Roth 401(k). That legislation change begins in 2024. In our view, some of the SECURE Act 1.0 and 2.0 updates were long overdue. The new rules recognize that Americans are living and working longer than previous generations.

2) Rollover of 529 Plans

Starting in 2024 and subject to annual Roth contribution limits, assets in a 529 plan may be rolled into a Roth IRA, with a maximum lifetime limit of $35,000. The rollover must be in the name of the plan’s beneficiary. The 529 plan must be at least 15 years old. In the past, families may have hesitated in fully funding 529s amid fears the plan could wind up being overfunded and withdrawals would be subject to a penalty. Though there is a $35,000 cap, the provision helps alleviate some of these concerns.

3) Employer-sponsored plans gain more support

Too many Americans do not have access to employer plans or simply don’t participate. Starting in 2025, companies that set up new 401(k) or 403(b) plans will be required to automatically enroll employees at a rate between 3% and 10% of their salary.

The new legislation also allows for automatic portability, which will encourage folks in low-balance plans to transfer their retirement account to a new employer-sponsored account rather than cash out.

As a way to encourage employees to sign up, employers may offer gift cards or small cash payments. Think of it as a signing bonus. Employees may opt out of the employer-sponsored plan.

4) Increased catch-up provisions

In 2025, 2.0 increases the catch-up provision for those between 60 and 63 from $6,500 in 2022 ($7,500 in 2023 if 50 or older) to $10,000, (the greater of $10,000 or 50% more than the regular catch-up amount). The amount is indexed to inflation. Beginning in 2024, catch-up dollars are required to be made into a Roth IRA unless your wages are under $145,000.

5) Charitable contribution allowances are expanded for 2023

Starting in 2023, the SECURE Act 2.0 allows a one-time, $50,000 distribution to charities through charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts. One must be 70½ or older to take advantage of this provision. The $50,000 limit counts toward the year’s RMD.

It also indexes an annual IRA charitable distribution limit of $100,000, known as a qualified charitable distribution (QCD) beginning in 2023.

6) Back-door student loan relief

Starting next year, employers are allowed to match student loan payments made by their employees. The employer’s match must be directed into a retirement account, but it is an added incentive to sock away funds for retirement.

While new legislation is often a mixed bag of changes, we welcome many of the changes found in the SECURE Act 2.0. Please keep in mind that this article is a high-level overview of the SECURE Act 2.0 and not a comprehensive review. If you have questions about how this new legislation may impact your financial future, our team is here to help you find the answers you need.


When to Expect Your Tax Documents 

As tax preparation season is underway, you’ll want to know when tax documents may be headed your way. For TD Ameritrade, your 1099-R forms are already available in your account. Your consolidated Form 1099 will be available by February 24th at the latest. For Pershing, the first version of your 2022 tax documents will be available January 31st with revisions applicable on the following dates: February 15th, March 1st, and March 15th. Follow this link to access your client account portal.

Securities offered through American Portfolios Financial Services, Inc., Member: FINRA, SIPC. Advisory services offered through American Portfolios Advisors, Inc. and Novem Group, Inc., SEC-Registered Investment Adviser firms. American Portfolios Denver, Inc. and Novem Group, Inc. are independent of each other and independent of American Portfolios Financial Services, Inc. and American Portfolios Advisors, Inc. To help you better understand the different approaches for your investments, please review the American Portfolios Customer Relation Summary and the Novem Group Customer Relationship Summary.