The Need to Know on SECURE Act 2.0 - Continued

The Need to Know on SECURE Act 2.0 - Continued...

FIVE THINGS YOU SHOULD KNOW

1. Equity Markets – were mixed this week with U.S. stocks (S&P 500) down -0.18% while international stocks (EAFE) rose 0.49%.
2. Fixed Income Markets – were lower with investment grade bonds (AGG) down -0.41% while high yield bonds (JNK) fell -0.35%.
3. Hawkish Tone – persistent inflation saw many of the most hawkish Fed policymakers signaling that bigger interest-rate hikes may be on the horizon. Cleveland President Mester said she saw a “compelling economic case” for a 50-basis point hike at the Reserve’s last meeting that was echoed by James Bullard. Philadelphia President Harker also noted that the Fed may need to raise rates above 5% to fight inflation. Policymakers will be looking closely at the series of upcoming economic data prior to their March meeting.
4. CPI Report – the annual inflation rate only slightly moved down to 6.4% in January from the previous reading of 6.5%. This was barely above market forecasts 6.2%. This still marks the lowest reading since October 2021 with food coming in at 10.1%, cost of used cars down (11.6%), shelter up 7.9%, and energy up 8.7%. In comparison to December, CPI rose 0.5%, the most in three months. Core inflation slightly moved down to 5.6% YoY, from 5.7% the previous month.
5. Key Insight – This week Jon and Dave continue their conversation on SECURE Act 2.0 and highlight the benefits of the five key provisions outlined previously. From inherited IRA’s to small businesses, they’ll cover the significant points you need to know.

INSIGHTS for INVESTORS

At TEN Capital, we continually update our clients on the market and regulatory changes. A few weeks back, we released five key provisions related to the SECURE Act 2.0 that may impact your retirement/savings goals. Here are the following five benefits of the SECURE Act 2.0 that we believe could make a significant impact on the lives of many of our clients:

• Changes to the estate planning rules: The SECURE Act 2.0 proposes modifying the rules around inherited IRAs and 401(k)s, including limiting the timeframe for beneficiaries to take distributions. This could help many IRA beneficiaries with substantial retirement assets and concerns about the impact of taxes on their estate plan.

• Catch-up contributions required to be Roth: The SECURE Act 2.0 requires that plan participants aged 50 or older make catch-up contributions to a Roth account. Currently, pre-tax or Roth contributions are allowed. Starting in 2024, all catch-up contributions for workers with wages over $145,000 during the previous year must be deposited into a Roth account. The wage threshold will be adjusted annually for inflation after 2024

• SIMPLE and SEP IRAs may now accept Roth contributions: Before 1/1/23, SIMPLE IRAs and SEP IRAs could only have pre-tax contributions. Now, for tax years starting in 2023, both SEP and SIMPLE IRAs can offer Roth options. There are logistical items the IRS needs to clear before making these contributions, so we can release more specifics in the future.

• Creation of a new automatic enrollment safe harbor for retirement plans: The SECURE Act 2.0 proposes to create a new automatic enrollment safe harbor for retirement plans. This could make it easier for employers to automatically enroll their employees in retirement savings plans and encourage more workers to save for their future.

• Incentives for small businesses to offer retirement plans: The SECURE Act 2.0 proposes to provide tax incentives for small businesses to offer retirement plans to their employees. This could help many workers who are employed by small businesses gain access to retirement savings plans.

Overall, the SECURE Act 2.0 has the potential to make a significant impact on the retirement savings landscape for hardworking Americans. As with any proposed legislation, it's essential to work with a trusted financial advisor who can help you understand how the changes may impact your individual retirement/savings goals (this is why you have us!)

As always, give us a shout; we’re happy to answer all questions you may have!

Have a great weekend,

Jon and the team at TEN Capital

DATA, JUST THE DATA

Data points this week included:

• U.S. Jobless Claims – fell by only 1K claimants to 194K for the week ending February 14^th. This was slightly below forecasts of 200K and is still showing a tight labor market. The four-week moving average has been increased to 189.5K.

• U.S. CPI – the annual inflation rate only slightly moved down to 6.4% in January from the previous reading of 6.5%. This was barely above market forecasts 6.2%. This still marks the lowest reading since October 2021 with food coming in at 10.1%, cost of used cars down (11.6%), shelter up 7.9%, and energy up 8.7%. In comparison to December, CPI rose 0.5%, the most in three months. Core inflation slightly moved down to 5.6% YoY, from 5.7% the previous month.

• U.S. Retail Sales – shockingly bumped up 3% MoM in January, which is the largest increase since March 2021, and far above forecasts of a 1.8% rise. This follows a (1.1%) dip in December with the largest increases being found in sales at department stores up 17.5%, food services up 7.2%, and motor vehicles up 5.9%. Core retail sales, which exclude autos, gas, building materials, and food services were up 1.7%.

• U.S. Housing Starts & Permits – fell by (4.5%) MoM to an annually adjusted rate of 1.309M in January. This is the lowest reading since June 2020 and was far below forecasts of 1.36M. Single-family housing starts fell (4.3%) to 841K and multi-family housing starts drooped by (5.4%) to 457K. Building permits rose 0.1% MoM to an annual adjusted rate of 1.3M. Single-family permits fell by (1.8%), and multi-family permits rose 2.5%.

• U.K. CPI – the inflation rate in the U.K. fell by (0.4%) from 10.5% to 10.1% for the month of January. This marks the third consecutive month of slowing inflation, which has been in double digits in six out of the last seven months. Prices slowed in food and beverages, up 16.7% and clothing and footwear up 6.2%.

• Eurozone Industrial Production – dipped (1.1%) MoM in December, which follows a 1.4% rise in November and was slightly worse than expectations of a (0.8%) decline. Intermediate goods output fell (2.8%) and was followed by durable consumer goods output down (1%). Energy output rose 1.3% after five consecutive months of decline.