Good To Know!
First Quarter 2022 Newsletter
    Our newsletter is intended to help you think about your own finances and make better decisions, based on our advice for our clients in their lives right now.  
    As usual when starting a new year, we have a fresh set of contribution limits and test limits from the IRS. We use those in our planning meetings when they're relevant for clients. Click here for Morningstar's recap which can tell you what the new levels are. 

    If this newsletter arrived in your junk mailbox, click "add us to your address book" in the footer below.
Foreign Policy Association's Great Decisions Studies
   Does how much our government borrows matter? Do high deficits cause inflation? I've long been a member of the Foreign Policy Association's Great Decisions studies. We pore through a fresh workbook on relevant topics annually with knowledgable speakers.
   I co-led last month's review on MMT, Modern Monetary Theory, for my Kansas City chapter. MMT says government deficits aren't always important. Many of us don't subscribe to that. If you'd like copies of the excellent materials we referenced for our discussion, just let me know.
   In February I attended an insightful talk on Russia given by a chapter of the World Affairs Councils of America, a sister organization. They host a high-profile lecture series (think ambassadors and Brookings Institute professors). If you'd like information on WACA or Great Decisions, I'm glad to share.
Weaver Financial 1st Quarter 2022

Let’s Do The Numbers 

    In a nutshell in the 1st quarter bonds lost unprecedented amounts and stocks lost money too. Covid receded from the headlines and hospitals. Russia’s war on Ukraine shook the nation as war returned to our world. The Federal Reserve reversed course and increased short-term interest rates .25%. U.S. large companies lost -5%. U.S. small company stocks dropped -8%. Overseas stocks lost -5%. Bonds lost an astonishing -6%, a big move for that asset class.
   Click on the video above to hear full details, or skim the Cliff notes here.
   Corporate earnings on U.S. large companies grew 30% in 4Q 2021! and are projected to grow a modest 5% for the quarter we just finished in 2022. Earnings growth was an amazing 45% for all of 2021, but that’s due to covid measures.
   Supply chain issues are starting to ease. Inventories are building again. Earnings growth for 2022 is predicted to be 9%. U.S. gross domestic product (GDP) grew 7% in the 4th quarter, and 5.7% for 2021. A more normal 3% is projected for 2022.
   The unemployment rate has again dropped to an ultra low 3.6%; it was 3.5% pre-covid. People are returning to the work force. Average hourly earnings rose 5.6% in March but inflation (CPI) is running 8%.
    Most of these numbers are great but the markets are down for the quarter. Why? It’s mostly the Fed. They reversed interest rates in March, which were at 0%. They are taking away the punch bowl. They have 2 goals: (1) to control inflation, and (2) to get to full employment. A 3.6% unemployment rate is darn close to that. But I probably don’t need to tell you that inflation has spiked from our normal 2% to 8%.
    Most pros expect the Fed to increase the short-term interest rate to 2% (from 0%) by year-end, with more hikes ahead. Most expect the Fed to pull out $80-$90 billion out of the system each month. Such tightening eventually moderates business growth, but can cause a recession.
   Does the war impact our economy? Yes but not as much as the Federal Reserve’s actions. The war impacts our values and morals more than our stock and bond markets.
   Overseas central banks overseas started increasing their interest rates before we did. The war has impacted developed markets such as Europe even more. Their markets are down roughly 5%. Asian markets are not faring any better. China has locked down some cities and Japan is still closed to tourists due to covid.
   Bottom line? We’re into 2022, growth will be slowing. The markets – both bond and stocks – will be volatile because of the Federal Reserve’s interest rate moves and the war. 
   What’s our best case? We’ll have modest growth in earnings and stock prices this year. Worst case? Very few pros predict this right now, but it’s that the Fed will mismanage and tip us into recession, hopefully a short one. We’ve employed diversification in a variety of solid quality investments in your portfolios to navigate through. Plus we’ve built reserves for upcoming spending needs.
   Thank you for your interest. Please call or email if you have any questions. 

Credit Card   or   Debit Card   or   Tap To Pay?
   In days rife with hacking and phishing, be mindful of how you pay. 
Why and when use credit cards?
If your card will leave your sight, these are safer. Credit cards give you a "refuse to pay" dispute option at the end of the month. When buying online, these are features you want. Plus the Fair Credit Billing Act limits fraudulent charges on credit cards to $50 if someone else starts using your credit card number.
Why and when use debit cards?
If someone else gets your debit card number or if it's stolen, you're responsible for $50 of charges if you report it within 2 days. If it's on day #3 or within 60 days, you pay the first $500. After 60 days? You pay for everything the thieves bought. Still, debit cards usually don't have annual fees. You don't pay high interest on balances since money is taken immediately out of your account.
Why and when use Tap To Pay?
This has good security if your phone and app use strong passwords. Tapping with your phone - via Google Pay, Apple Pay, Samsung Pay, and Android Pay apps - doesn't transmit the precious number on your credit card or debit card to the merchant. Using "tokenization", these apps send a one-time code instead. 
Planning How You'll Send In $$ for 2022 Taxes
    It's that time of year - taxes. It's more than just settling up on the final bill for 2021. We need to plan how we'll get our tax prepayments in during the year under way.  Taxes are "prepaid" either through withholding or by sending estimated tax payments. Here's a simple approach. Examine your tax return and list the various sources of income on page 1 of your Form 1040, and Schedule 1.
    If you get a salary, money to cover the related federal and state tax is usually withheld from your paycheck by your employer. 
    If you receive social security benefits, you can have taxes withheld.
    If you withdraw spending $$ from your IRA account, you can opt to have the custodian send in money to cover the related federal and state tax. That's calculated based on the percentages you setup.
    If you get income from other sources, such as investment income of dividends and capital gains, or rental income, or business income, there's usually no withholding mechanism. You have to plan for that yourself. Most folks send in estimated tax payments 4 times a year to cover that income. Your CPA can help you determine how much.
    If you have an unexpected bonanza during the year, the IRS expects you to send in an estimated tax payment that quarter.
    What if those sources of income vary widely? Using the safe harbor rules can help. You can avoid late payment penalties if you pay in at least 90% of the tax bill for 2022 (whatever that ends up being), or 100% of the tax bill for 2021, whichever is smaller. If your adjusted gross income is over $150,000, use 110%, not 100%.
    What if you forget? Or what if you're short? If you have an IRA and are over 59 1/2, and if it's not yet Dec. 31st, you can still take a withdrawal and have all of it sent in for tax withholding. The IRS assumes it was sent in ratably throughout the year!
   Now is the best time to setup your plan for this year's tax bill.
In-office or Zoom? Your call. We're doing both.
Resource Tip:
Q: Two clients are moving their state of residency in '22 - one to sunny Arizona, and another to Mexico. Both have diligently researched. Where to start? Which factors are relevant? 
A: Ask your financial planner, CPA, P&C insurance agent, and estate planning attorney - all of them - for factors specific to your situation. Click here for a Kiplinger article of factors to research. Click here for a checklist of steps to officially change domicile.
Copyright © 2022 Weaver Financial, All rights reserved.

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.

Email Marketing Powered by Mailchimp