Dickmeyer Boyce Financial Management - Wisconsin

Seeking investment diversity? Be mindful of today's S&P 500 (and associated index funds).......

This past Monday (July 8th), the published a revealing article regarding today's S&P 500: "The S&P 500 Isn’t as Diverse as It Used to Be. Here’s Why that Matters".

The article highlights and compares several important facets of 2024’s S&P 500 index to that of the 1970s 🕺: concentration, interest rate sensitivity, dividend yield, valuation and global correlation.

Consider these findings…..

1970s S&P 500

➡️ Concentration: Industrials & Materials sector made up 26% of the index.

➡️ Dividend yield: 4.11%

➡️ Global correlation: 0.24

➡️ Shiller CAPE: 13.5 (CAPE = Stock price divided by 10-yr average inflation adjusted earnings)

2024 S&P 500

➡️ Concentration: Information Technology & Financials make up 42% of the index w/ tech representing 29 percentage points of that figure.

➡️ Dividend yield: 1.45%

➡️ Global correlation: 0.70(ie, much higher correlation to global indices)

➡️ Shiller CAPE: 30+

THE MESSAGE?

⚠️ The S&P 500 isn’t providing the same amount and type of diversification it once did (re: global correlation, concentration).

⚠️ The S&P 500 is much more interest rate sensitive than it used to be (Financials and Information Technology are interest rate sensitive sectors).

⚠️ Investors are paying a steep price to buy the S&P 500 index (re: Shiller CAPE) at a time the index is much more sensitive to rates.

⚠️ The index has lost a significant amount of its buffer to market volatility with its much lower dividend yield (dividends lower the volatility of stocks by mitigating capital losses).

How well is your portfolio mitigating these risks?

It’s one of the most commonly asked questions at this most wonderful time 🎅🏼 of the year……..

Should I do a Roth conversion?

With 23 trading days left in 🗓️ 2023, time is wearing thin to get a Roth conversion completed.

What is a Roth conversion?

In a simple sense, it is converting money that you have saved on a pre-tax basis (i.e., Rollover IRA, traditional IRA, 401k) to an after-tax Roth-IRA account. You pay ordinary income taxes on the converted amount for the benefit of those converted funds becoming tax exempt (no taxes paid for qualified distributions).

What are the factors to consider? There are many and they vary for each individual…….

🎁 What are your legacy objectives? Roth-IRA’s are among the most efficient
and effective ways to leave an inheritance.

🎁 What is your expected income? Lean income years can be a great time to
convert as the cost to do so (income taxes) is lower.

🎁 Where are you in your career? Younger professionals who anticipate a
growing income (and therefore, taxes) might be well served taking advantage
of these conversions now.

🎁 Payback. You might be surprised at the payback period for a Roth
conversion. This payback may or may not justify your decision.

🎁 Retirement income flexibility. How much diversification do you have in
account type (i.e., brokerage, 401k, IRA) and could more tax-exempt savings
(Roth) help to lower expenses in retirement (Medicare premiums, income tax,
Social Security taxes).

Before you take advantage of this potential stocking stuffer 🧦 strategy, please do your homework to assure that it makes sense for you!

We are already in the 4th Quarter 🗓️ of 2023……

This is a very important time of the year, and for more reasons than needing to figure out your Halloween 🧛🏿 costume and Holiday travel plans. But, please work on those too.

October is a great month to get started on taking advantage of key year-end tax planning strategies, like:

🎃 Maximizing your contribution to a 529 College Savings Plan and taking advantage of any state tax deductions or credits in doing so.

🎃 Deferring income by maximizing your tax deferred contributions to a 401(k), 457(b) or 403(b) plan.

🎃 Completing Roth Conversions (by 12/31/2023) and planning for the funding of any Roth-IRA, Traditional-IRA and Health Savings Account (HSA) contributions (by 4/15/2024).

🎃 Taking advantage having met your health insurance deductible by scheduling any medical appointments or procedures

🎃 Using all of your Flexible Spending Account funds. Remember, these funds expire at the end of the year

🎃 Tax loss harvesting. Take advantage of any losses in your taxable investment accounts (i.e., brokerage) by using them to offset any large capital gains.

Get a jump start on your year-end tax planning! Message me for a checklist.

40% of Americans 65 and older rely on this source for 50% or more of their income……..

What is Social Security.

Why is Social Security so important and why should we be paying attention?

For many of us, Social Security will be the only source of retirement income designed to keep pace with inflation 📈. This year beneficiaries received an 8.7% increase. In 2024, this increase is expected to be around 3%.

It has an estimated INSOLVENCY date of 2034.

Should congress 🏛️ not act to shore us this entitlement program, beneficiaries could expect to receive 80% of their scheduled benefits at that point.

That would potentially have a major impact for many of us.

Are you factoring this potential change into your retirement income plan? How?

What’s the best advice 🗣️ you have ever given and received?

Me……..

Given: Have some patience.

Received: Have some patience.

I’ve received that advice much more than I’ve given it. And as a Financial Advisor, we’re often emphasizing patience.

What about you?

And that's clearly a Rolex with a Hermès band.