Three factors to consider when making investment planning decisions

By Brant Wiehardt EBS CONTRIBUTOR

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The fall season often prompts us to review the progress of our finances over the course of this year and adjust as necessary to prepare for next year. We have identified three factors that present potential planning risks and opportunities.

First, interest rates are forecasted to continue to rise or at least remain elevated. Understanding how higher rates are likely to affect you and what to do when rates change is important as you seek to meet your financial goals.

Second, the potential for a recession in the short-term future still seems plausible. We have already seen a slowdown in manufacturing and housing data. The good news is that analysts believe the economic contraction will be moderate and the U.S. will see a return to growth in 2024.

Third, declining stock values may accompany the economic slowdown over the coming months as earnings growth slows. A rebound is anticipated in 2024 as the economy begins to recover.

Now is the time to consider planning strategies to help protect your wealth and take advantage of opportunities as these economic and market trends play out.

What planning steps can you take today?

With this information in mind, here is an actionable checklist of current planning opportunities.

1. How will higher interest rates impact your income? Are you nearing retirement or in retirement? Your bond portfolio will need to be carefully managed to help enable you to take advantage of higher interest rates and help protect you from future rate fluctuations as you seek to meet your income needs. As such, there are considerations for short term bonds and long-term bonds to help optimize and manage risk. Discuss with your advisor to weigh your investment options to determine a strategy that is right for you and consider other income-generating strategies.
2. How can a slowing economy help your planning strategies? If stock values decline as forecasted, the answer may lie in taking advantage of lower asset prices for long term tax planning. For example, if you think you are likely to be in the same or higher tax bracket when you retire, you may want to talk with your advisor about converting your Traditional IRA to a Roth IRA. Converting allows you to reposition your current tax deferred Traditional IRA to a tax advantaged Roth IRA by paying federal and possibly state income tax (but without the IRS 10% additional tax for taking early or pre-59-1/2 distributions on the taxable amount of the conversion). The benefit of a Roth conversion is qualified distributions are tax free – unlike distributions from a Traditional IRA. Qualified distributions, which are tax free and not included in gross income, are when your account has been open for more than five years and you are at least age 59-1/2, or as a result of your disability, or using the first-time homebuyer exception, or taken by your beneficiaries due to your death.
3. Can depressed asset prices offer other opportunities? Are there tax advantages in gifting assets when their valuations are lower? The answer is yes. There are several strategies you may want to consider. These may include gifting stock to a charity or family member as part of a wealth transfer strategy. In both cases the recipient may benefit more if the assets are appreciated. A family member may also pay less tax.

Some of the planning strategies referenced are complex; we recommend discussing them with your tax, legal and investment professionals before implementing them.

Brant Wiehardt is an Associate Vice President and Financial Advisor at Shore to Summit Wealth Management. He currently works and lives in Bozeman, MT with his wife and children.

Wells Fargo Advisors Financial Network is not a legal or tax advisor. Be sure to consult your own tax advisor and investment professional before taking any action that may involve tax consequences.

Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy Wells Fargo Advisors Financial Network and Shore to Summit Wealth Management are not legal or tax advisors. You should consult with your attorney, accountant and/or estate planner before taking any action.

Shore to Summit Wealth Management is located at 105 E. Oak Street, Unit 1A Bozeman, MT 59715 # 406-219-2900.

This advertisement was written by Wells Fargo Advisors Financial Network and provided to you by Brant Wiehardt, Associate Vice President. Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC.Shore to Summit Wealth Management is a separate entity from WFAFN. 

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