Monthly Newsletter November 2024
Natalia Ivanova, IAR?
Founder and CEO, Financial Planning Specialist at NewGen Wealth Creation | Former Financial Advisor at Morgan Stanley
Each month, I'll provide you with the latest news, tax tips, and resources to help you stay on top of your finances. In this month's newsletter, we will discuss the 2024 election, year-end financial reminders, and recent market updates.
KEY POINTS Nov 2024
Decoding the Candidate's Tax Proposals
Can you believe how much has changed in just a few years? The world has faced significant challenges, from the COVID-19 pandemic to the war in Ukraine, alongside extreme weather events, rising inflation, and escalating geopolitical tensions.
Yet, amidst these challenges, there have been bright spots. Dozens scientific discoveries, new breakthroughs in the fight against cancer, developments in biotech research and this is before we get to the really "big stuff", like Elon Musk’s famous intentions to colonize Mars. ?
Despite the excitement of the future, I've noticed people are less enthusiastic about the upcoming United States presidential election that will take place on Tuesday, November 5.
I’m not here to tell you whether to vote or not; I want to emphasize how crucial this election is for our businesses, employees, families and futures.
If you, like me, follow the election but still feel unsure about each candidate's policies, this newsletter is for you. I’d like to break down the candidates' proposals in a clear, understandable way to help you make informed decisions at the polls.
Before we dive into specific policies, it’s important to remember one key point:
United States president cannot unilaterally create laws. Many campaign promises require action from Congress, meaning the president alone doesn’t have the power to enact sweeping changes. As you hear bold claims from candidates, keep in mind that it often takes more than just a signature to turn those promises into law.
Now, let’s examine the tax proposals from former President Trump and Vice President Harris:
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Trump’s Tax Proposals:
Trump aims to lower corporate tax rates to as low as 15%, arguing this will encourage companies to remain in the U.S. and boost domestic production.
He also proposes tariffs on imported goods to support local manufacturing. While this could benefit some U.S. manufacturers, it may also raise costs for businesses that rely on imports.
His plan includes eliminating taxes on Social Security checks, capping the highest tax bracket at 37% ( There are currently seven federal tax brackets in the United States, with rates ranging from 10% to 37%), and maintaining capital gains taxes at 20%( currently Long-term capital gains are taxed at 0%, 15%, or 20%).
It’s also crucial to remember the implications of the Tax Cuts and Jobs Act (TCJA), which Trump enacted during his presidency and is set to expire on December 31, 2025:
Harris’ Tax Proposals:
In contrast, Vice President Harris proposes raising corporate taxes to 28% and increasing capital gains taxes from 20% to 28%. This could significantly impact business owners and real estate investors.
She aims to elevate the highest tax brackets to 39.6% while increasing the child tax credit.
Additionally, Harris supports a $25,000 tax credit for first-time homebuyers and advocates for taxing unrealized capital gains for the wealthiest Americans, which may present administrative challenges and could compel some to sell assets to cover taxes.
Both approaches have serious implications for business owners like you. Trump’s proposal to lower corporate taxes could stimulate investment, but his tariffs may drive up costs. Conversely, while Harris' tax increases could generate revenue for social programs, they might lead to long-term inflation and reduced liquidity for businesses.
A Trump win may benefit companies with high taxes and heavy spending on research and development, such as biopharma. In a Harris victory, profitable companies that pay high taxes could be negatively affected, especially if her administration raises corporate tax rates or accelerates or expands Medicare drug pricing negotiations.
I encourage you to explore these policies beyond the headlines and consider how they may affect you and align with your values. If you want to look into other policies, here is an easy read that summarizes them well.
Remember, the election is more than just choosing a president; it’s about understanding how their policies will impact your business and your future.
[1] According to a study conducted by Magnify Money, found here. [2] According to a study conducted by Canex, found here. [3] 2021 Industry-wide survey of 786 tax professionals by Intuit Accountants, found here.
Year-End Tax Planning
As we approach the end of the year, I'm spending a lot of time with clients discussing tax planning. It's a highly personalized process, tailored to each individual's unique financial situation. Whether you're a W-2 employee, self-employed, married, single, a parent, or a property owner, there are strategies to help you reduce your tax burden.
It's amazing how a few strategic moves can significantly impact your bottom line. I've noticed a common theme among many business owners:?missed opportunities. Whether it's overlooking deductions, neglecting retirement savings, working with a less aggressive CPA, or simply not having a solid tax strategy in place, these oversights can cost you dearly.
?Before diving into specifics, it’s essential to remember a few key points:
While there aren't any new tax deductions for 2024, existing deductions have been adjusted for inflation. This means you can potentially save more on your taxes.
One of the most effective ways to reduce your tax liability is through a personalized tax strategy. By considering your unique circumstances, such as your age, income, risk tolerance, and retirement goals, we can tailor a plan that maximizes your tax benefits.
While there's no one-size-fits-all approach to tax minimization, several strategic moves can significantly impact your tax liability. Here are some key tax strategies to consider:
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Traditional 401(k): If your employer offers a 401(k) with a matching contribution, it's a no-brainer to contribute at least enough to get the full match. For example, if your employer offers a 3% match, contribute at least 3% of your salary to maximize your free money.
But why stop there? Consider maxing out your 401(k) contributions, if you can. For 2024, that's $23,000, or $30,500 if you're 50 or older. This can significantly reduce your taxable income and boost your retirement savings.
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Roth vs. Traditional: Which is right for you?
The choice between a traditional 401(k) and a Roth 401(k) depends on your individual circumstances.
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Leveraging Roth IRAs
If your employer doesn't offer a Roth 401(k), you can still contribute to a Roth IRA. However, there are income limits. If you exceed these limits, you can consider a Roth IRA conversion. This involves converting pre-tax funds from a traditional IRA to a Roth IRA.
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Roth Conversions
Roth conversions offer a strategic way to potentially reduce your future tax burden. By converting traditional IRA or 401(k) funds to a Roth IRA, you can enjoy tax-free growth and withdrawals in retirement. However, it’s important to consider the immediate tax implications, as the conversion amount is typically treated as taxable income in the year of conversion. By carefully timing your conversions and understanding your individual tax situation, you can maximize the benefits of this powerful strategy.
For example, I recently worked with several clients with net worths between $2 and $5 million. By implementing strategic Roth IRA conversions, we projected tax savings of over $3 million over their lifetimes. Not bad, right?
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Self-Employed? Consider a Solo 401(k)
If you're self-employed, a Solo 401(k) is a powerful tool to supercharge your retirement savings. Unlike traditional IRAs, Solo 401(k)s offer higher contribution limits, allowing you to save more each year. You can customize your plan to meet your specific needs, whether it's making employee contributions, employer contributions, or both.?
I've noticed that there's often confusion around Solo 401(k)s. Here are some key points to remember:
By understanding the intricacies of Solo 401(k)s and working with a qualified wealth and tax advisors, you can maximize the benefits of this powerful retirement savings tool.
Don't Forget About RMDs
Once you reach a certain age, you'll be required to take Required Minimum Distributions (RMDs) from your retirement accounts. Failing to do so can result in hefty penalties.
领英推荐
To help you stay organized and streamline your tax preparation process, I've created a comprehensive Tax Filing Checklist. While it's specifically designed for self-employed individuals, many of the tips can be applied to any tax situation.
Remember, every financial situation is unique. I believe in a personalized approach to tax planning. That's why I'm committed to understanding your specific needs and goals. Whether you're a seasoned entrepreneur or just starting out, I can help you navigate the complexities of tax planning and make informed decisions.
On The Markets
This week, Wall Street experienced significant volatility, with major indices fluctuating widely.
The tech sector was a major driver of market movement. Disappointing earnings reports from tech giants like Microsoft and Meta led to declines in their stock prices and a broader market downturn, impacting indices like the S&P 500 and Nasdaq.
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Easing Inflation Concerns
On a more positive note, recent inflation data, measured by the Personal Consumption Expenditure (PCE) price index, showed a slowdown, easing concerns about aggressive interest rate hikes from the Federal Reserve. However, the unticipated job report, clouded by strikes and hurricanes, provided a more mixed picture.
Job growth stalled in October, with employers adding only 12,000 positions. While unemployment remained steady at 4.1%, the figure was significantly lower than economists' expectations, raising questions about the underlying strength of the labor market.
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A Cautious Outlook for the S&P 500
Goldman Sachs recently issued a cautious outlook for the S&P 500, citing high valuations and potential economic headwinds. While the index has historically delivered strong returns, it's important to remember that past performance is not indicative of future results.
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The Impact of AI and Automation
The rapid advancement of AI and automation has the potential to reshape industries and economies. While some experts are optimistic about the potential for significant economic growth, others are concerned about job displacement and potential negative consequences.
Cryptocurrencies Bullish Run
Bitcoin has been on a bullish run, nearing its all-time high. This surge is fueled by optimism surrounding potential regulatory changes in the U.S., particularly under a potential Trump presidency.
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As a financial advisor, I know that election season often brings about a sense of unease, especially during times of economic uncertainty. The potential for policy shifts and market volatility can be unsettling. However, it's important to remember that markets have historically shown resilience, and long-term investing remains a sound strategy.
While the specific policies proposed by candidates can have short-term impacts, the long-term trajectory of the market is influenced by broader economic factors such as interest rates, inflation, and technological advancements. It's crucial to maintain a balanced perspective and avoid making impulsive decisions based on short-term market fluctuations.
Stay updated on market trends, economic indicators, and geopolitical events, but avoid making hasty decisions based on rumors or speculation.
By staying disciplined, focused, and informed, you can weather market storms and emerge stronger.
This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security or digital asset in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.
How to Work with
Tax Planning Strategy
Stop blindly writing out big checks to the IRS without a personalized tax strategy.
Roth Conversion Analysis
We can help you analyze your specific financial situation and determine if a Roth conversion is the right move for you.
Portfolio Risk Analysis
Don't leave your retirement savings to chance. With this?service, you can feel confident that your investments are optimized for your future.
Personal 401(k) Audit
We will help you identify weather your retirement plan, such as a 401(k) or 403(b), is properly invested, has low fees, and aligns with your financial goals and dreams.
What's Next
Stay tuned for our December Monthly Newsletter, where we'll dive deep into post-election insights.?I hope this newsletter has been helpful in keeping you informed about the latest developments.
Natalia Ivanova
Founder and CEO
Financial Planning Specialist
NewGen Wealth Creation LLC | Wealth Management
Our commitment to our clients:
Every day is dedicated to honoring the trust and faith my clients have placed in me.?I?listen to their concerns, understand their needs and continuously work to find solutions and structures that help meet their goals.
NewGen Wealth Creation LLC is an Investment Adviser registered with the Securities & Exchange Commission (SEC), principally located in the state of Puerto Rico. All views, expressions, and opinions included in this communication are subject to change. Please contact us if there is any change in your financial situation, needs, goals or objectives. The information contained in this electronic communication is intended only for the use of the recipient. For your privacy and security, do not include sensitive information using emails that are not secured.
NewGen Wealth Creation LLC is an Investment Adviser offering services in Puerto Rico and in other jurisdictions where it is exempt from registration. All views, expressions, and opinions included in this communication are subject to change. Please contact us if there is any change in your financial situation, needs, goals or objectives. The information contained in this electronic communication is intended only for the use of the recipient. For your privacy and security, do not include sensitive information using emails that are not secured.
Risk Considerations: There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, investors can lose money.
Year-end planning is crucial!