Apprise Wealth Management's Selected Readings for the Week of May 31, 2020

Personal Finance

June 4, 2020
Personal Finance

I hope everyone is staying safe and healthy. It’s hard to imagine that in many ways coronavirus is not the top story in the news this week. The recent deaths of George Floyd, Ahmaud Arbery, and Breonna Taylor are tragic events in a series of injustices that have yet again shined a light on the layers of historical prejudice and systemic racism that continue to exist in our country. Black Lives Matter. Change needs to happen. We must ALL do our part in making it so.

Roth conversions come up frequently in these weekly newsletters. At Wednesday’s close, the S&P 500 Index was down a little more than 3% year-to-date and less than 8% from its February 19th high. This week’s first article should shed some light as to why many financial advisors still recommend Roth conversions. As for the market itself, while we know the market is not the economy, it’s still hard to explain the market’s rapid rise. One fact to keep in mind: Amazon, Apple, Microsoft, Facebook, and Alphabet (Google) account for 42% of the S&P’s total market cap. These five stocks (which are held in some client portfolios) are up 3% year-to-date and 16% since February 19th.

If you have any friends that are nervous and do not have an advisor or whose advisor is not reaching out to them, feel free to have them schedule a call. I’m happy to spend 15 or 20 minutes answering their questions, no-obligation because they are a friend of yours.

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Click here for a video overview of this week’s content.

Here are the links to this week’s articles as well as a brief description of each:


1.   As Advisers Worry COVID-19 Might Send Taxes Up, Retirement Funds Rush to Roth IRAs. In the wake of COVID-19 savers have rushed to move retirement funds into Roth IRAs. Why?

·        Roth IRA conversions are more valuable when the stock market falls.

·        The belief that taxes may increase in the future.

Roth IRAs are attractive because withdrawals are tax-free. But you don’t get a deduction when you contribute to a Roth IRA. You even pay tax on a Roth conversion. You are making a “bet” that your tax rate in retirement will be higher than it is when you were working. Many expect higher rates in the future making this even more unlikely.  

2.   Winners & Losers From the Work From Home Trend. Once the first stay-at-home orders were announced, many of us had to work from home. Those with young children also became part-time teachers. This happened unexpectedly. While many love working from home (including yours truly) there are pros and cons. The article shares some thoughts on the winners and losers from this trend.

3.   Opinion: Where Should You Put Your Retirement Contributions? When saving for retirement in a tax-advantaged way, you have several options:

·        Before-tax salary deferrals to a 401(k) or 403(b) at work.

·        If available, you could make Roth contributions instead.

·        If eligible, you could contribute to a traditional pre-tax IRA or a Roth IRA.

·        If you participate in a high deductible health plan, you can contribute to a health savings account (HSA).

Often overlooked or misunderstood, the last option is one of my favorites. HSAs can be the most tax-advantaged option. They are most valuable when you can afford to pay current medical bills out of pocket.

4.   68 Bits of Unsolicited Advice. On his 68th birthday, the writer decided to share “68 pithy bits of unsolicited advice” as his birthday present to the rest of us. As an investment advisor, I recommend this one: “Saving money and investing money are both good habits. Small amounts of money invested regularly for many decades without deliberation is one path to wealth.”

5.   Uncertainty II. Oaktree Capital’s Howard Marks Uncertainty II – a postscript to his recent memo Uncertainty – explains why we should be careful about the “experts” we listen to and the weight we assign to their pronouncements. It stresses the following points:

·        No one knows what’s going to happen.

·        The unpredictability of politicians is only one of many variables complicating the future today.

·        Tail-end events are all that matter.

Mr. Marks’ decision to write a follow-up to Uncertainty was inspired by two other articles he read: The Three Sides of Risk and Nobody Knows What’s Going to Happen. I recommend you read these articles as well.

If you need a pep talk or to discuss your investment strategy, please schedule a call or reply to this email. I'm here for you and happy to talk.

P.S. There has been an increase in coronavirus-related phishing and identity theft scams. Please be on alert for “official-looking” emails asking you to open an attachment or click a link to read an official statement – they may contain malware. If you get a suspicious email, check the sender’s name and email address to make sure they’re not fake. When in doubt, delete the email. Do you have someone in your life who you think might be at greater risk of email scams? Forward this to them so they're aware.

We hope you find the above posts valuable. If you would like to talk to us about financial topics including your investments, creating a financial plan, saving for college, or saving for retirement, please complete our contact form. We will be in touch. We can schedule a call or a virtual meeting via Apprise Wealth Management's Zoom account.

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