Building credit is important for all ages.  We have recently seen a few estate cases where the surviving spouse with many credit cards and car loans through the years find that they do not have their own individual credit.  The credit cards they hold were issued as the second card and their name was the co-name on a loan.  Suddenly, they need to establish credit in their 70s.  According to the Consumer Financial Protection Bureau (CFPB), an estimated 45 million Americans may not have their own credit.

We humans don’t like change. When change comes slowly, we learn to accept it. When change happens quickly, without our understanding of what the change portends, we become worried. The anxiety we feel results in a seeming lack of direction. If we know “what the deal is”, we can take measures to assimilate the change. Currently, our society is going through a number of changes, resulting in a disruption of the status quo.

A recent Marketwatch article claiming “you should have twice your salary saved by age 35” has angered many across the Internet. The article, which included advice from Fidelity Investments, said you should have the equivalent of a year’s salary saved by age 30, and double that by age 35.

In looking at the investment markets for the year, thus far, volatility is an important factor. The stock market, as measured using the S&P 500, began the year at 2674. It proceeded to go up to 2873 by early February, a gain of 7.4%. Most investors were very happy thinking that 2018 would be a continuation of the rapid increases from 2017. This was not to be the case.

Our New England winter finally appears to be subsiding into some warmer weather. As we shed our heavy winter clothing for lighter gear, we may find that some of our clothes don’t fit due to weight gain. If you are not weighing yourself regularly, this could come as a surprise to you. You were comfortable in your winter gear, but revisiting your warm weather clothing shows you the change.

Last year I wrote about the high earnings multiples of U.S. stocks. One of the easiest measurements of a stock, or stock market, is the relationship of earning to prices. For example: if Company A earns $1 over one year and the price of the stock is $20, its price earnings ratio is 20 (take the earnings and divide it into the share price). If Company B had earnings of 80 cents and it too had a stock price of $20, its price earnings ratio would be 25 (20 divided by .8). Currently, the trailing price earnings ratio (past years’ earnings) for the S&P 500 is 24.91.

Now might be your golden opportunity to convert your traditional IRA to a Roth IRA. The Tax Cut and Jobs Act that was signed into law in December lowered the top individual income tax rate to 37% from 39.6% and reduced many other rates as well. That means if you convert your traditional IRA to a Roth and agree to pay taxes on those funds now, you will be paying at a lower rate than in the past.

Last year I kept waiting for the stock market to make a correction. As I pointed out several times, the price earnings ratio was out of line with historic values. During 2017, in addition to not having a correction, we saw volatility at extremely low levels. The combination of these two gave many investors the belief that the market couldn’t go down during such good times. This led some of our investors to indicate that they wanted to take more risk in their portfolios. As I told each of them, when the market is rising, you think you can take the downturn, until it occurs.

The Tax Cut and Jobs Act signed into law in December made an important modification to 529 college savings plans, a widely used college savings vehicle.  529 plans can now be used for qualified K-12 educational expenses. 

The U.S. House and Senate have each separately passed a bill that will create sweeping tax reforms. There are substantial differences in the two bills. A joint group of Republicans from the House and Senate are working to incorporate their differences into one bill. Unlike the last major tax reform that took place in 1986, this bill is not retroactive to the beginning of tax year 2017, but will be implemented in 2018. One tax provision that will be enacted may impact many of our clients negatively. Beginning in 2018, a cap of $10,000 on state and local tax deductions will be enacted.