The Largest Social Security Cost of Living Adjustment In Over 40 Years!

Contributed by: Kali Hassinger, CFP®, CSRIC™

It has recently been announced that Social Security benefits for millions of Americans will increase by 8.7% beginning in January 2022, making this the highest cost of living adjustment since 1981. The increase is calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from October 1st, 2021, through September 30th, 2022. Inflation has been a point of concern and received a great deal of media attention this year, so this increase comes as welcome news for Social Security recipients who have received minimal or no benefit increase in recent years. 

In past years, the Medicare Part B Premium has often eaten away at the Social Security increase. In 2023, however, the base Part B Premium is being reduced by $5.20 to $164.90. This premium, however, can be increased based on income from the recipient's 2021 tax return. 

The Social Security taxable wage base will increase in 2023 from $147,000 to $160,200. This means that employees will pay 6.2% of Social Security tax on the first $160,200 earned, which translates to $9,933 of Social Security tax. Employers match the employee amount with an equal contribution. The Medicare tax remains at 1.45% on all income, with an additional .9% surtax for individuals earning over $200,000 and married couples filing jointly who make over $250,000. This is unchanged from 2022. 

For many, Social Security is one of the only forms of guaranteed fixed income that will rise over the course of retirement. The Senior Citizens League estimates that Social Security benefits have lost approximately 33% of their buying power since 2000. This is why, when working on running retirement spending and safety projections, we factor an erosion of Social Security's purchasing power into our client's financial plans. If you have questions about your Social Security benefit or Medicare premiums, we are always here to help!

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Q3 2022 Investment Commentary

Contributed by: Angela Palacios, CFP®, AIF®

2022 has brought steadily worsened news weighing on both stock and bond markets for three consecutive quarters. The Russia/Ukraine conflict, higher gas and commodity prices, a strong U.S. dollar, China's zero covid policy, supply chain disruptions, high inflation, rising interest rates, a minimum effective corporate tax rate, recession fears, and Cryptocurrency crashes have all wreaked havoc on investor sentiment. According to the AAII investor sentiment survey, as of 9/30/22, investors were only ever more bearish at four points in the history of the reading (8/31/1990, 10/19/1990, 10/9/2008, and 3/5/2009). "Unusually high bearish sentiment readings historically have also been followed by above-average and above-median six-month returns in the S&P500."

Raymond James recently wrote regarding severe recessions, "Recessionary bear markets have historically contracted 33% on average over a 13-month span. We are already down 24% (as of 9/29/2022) over nine months. Timing an absolute bottom is extremely difficult when uncertainty and volatility runs high. The index often capitulates at the bottom, reaching a low in sharp fashion for a very quick period, with very rapid recoveries. On average, the S&P 500 is up 16% in the first 30 days of a recessionary bear market bottom." This type of snap-back rally is particularly important to participate in for the success of a long-term investment strategy and is extremely difficult to try to time. We encourage investors to remain patient and trust in the financial planning process that plans for times like these to occur. Asset allocation, diversification, and rebalancing remain core tenets of our process during these times.

The FED is making up for lost time

The Federal Reserve continues to aggressively raise interest rates with an additional rate hike of .75% in September, making it the third consecutive .75% rate hike in a row (June and July). I believe The Federal Reserve feels guilty for letting inflation get out of hand and not responding quickly enough, so they are taking aggressive action now and signaling that they will continue to do so until they see improvement. Inflation resulted in less reduction than was hoped for by markets in September. So, the Fed is not resting on the hope that inflation will come down on its own; instead, they are taking aggressive action to force it down. They have decided to proactively fight it in the form of higher rates by year-end nearing 4.3% (another roughly 1-1.25% increase from where we are now). 

Policy adjustments need to happen with an eye toward future economic conditions, not current ones. The FED action in September is aggressive enough that if we continue along their anticipated path, it suggests there could be trouble for the economy ahead. It is likely that this intensified upward push will start to slow the economy, sending us into a recession, or what many are calling a hard landing now. This is why markets reacted so strongly to the downside for the last half of September.

Inflation

Inflation is starting to come down, and it is just not coming down as fast as the Federal Reserve (not to mention consumers) would like. Gasoline prices have continued their downward trend since peaking in June of this year. While that has helped curtail inflation, it is a lagging effect. Housing prices and food are the most troublesome components now. With mortgage rates catapulting to the 7% range on a 30-year fixed market, many people are getting priced out of the housing market. This means housing prices will likely start to decline, meaning less pressure on inflation in the coming months. Check out the video portion of our commentary for more in-depth information!

Bonds, Certificates of Deposits, and Treasuries are in style again!

Just as equities have experienced a tough year, bonds have also shared their own headwinds. With interest rates increasing rapidly this year, bond prices have come down and affected performance. But bond yields are finally paying some pretty attractive rates, and the yield on bond holdings is rising. Some might ask: "If rates are up, why is my brick-and-mortar savings account still yielding only .13% on average?” Banks are slow to adjust the interest they are paying because they have ample cash on hand to lend out (not to mention borrowing has all but dried up at these higher rates). So they do not need to pay you higher rates to attract you to deposit more money.  

Russia

For the moment, there is a lot of uncertainty in Europe from the Russia/Ukraine conflict. Putin is a wild card, as we do not know when and how he will strike out on any given day. It seems like he should gradually be getting weaker, but we do not know how long this conflict will continue. If there is a policy change or leadership change in Russia, international markets could be in a much better situation. 

Strength of the U.S. Dollar

High inflation and high-interest rates to fight the high inflation have strengthened the U.S. Dollar versus most other currencies worldwide. Our strong currency means importing goods from the rest of the world is cheaper. However, there are drawbacks to a stronger currency for companies that source revenue from overseas. On-shoring the profits from foreign currencies back to the U.S. dollar acts as a tax (on top of the new minimum tax rate imposed recently by the administration) to the corporation that must do so, meaning less profits. Following is a chart of how much the U.S. dollar has strengthened this year versus the Yen, Pound, and Euro.

Source: Raymond James

Recession Fears

Still, no one has officially declared that the U.S. is in a recession. Two-quarters of negative GDP (both of which happened in the first and second quarters this year) is the traditional definition of a recession. Politics and mid-term elections coming up will impact whether or not we will hear recession rhetoric out of Washington, but the definition is pretty clear. The National Bureau of Economic Research officially calls a recession here in the U.S. It weighs jobs, manufacturing, and real incomes when assessing whether or not we are in a recession and not just real GDP, so this is important information to watch.  

What if we are in a recession?

The average drawdown for the S&P 500 for past mild/moderate recessions (as opposed to severe recessions in the statistic above) has been 24%, which is almost exactly where we ended the quarter. 

We also had already hit this level in mid-June before the recovery experienced through the remainder of the summer. Leading into this year's drawdown, we took several actions in portfolios, including rebalancing (since equities had such a strong run in the second half of 2020 and 2021), adding a real asset strategy to help hedge potential inflation, and shortened duration on the bond portfolio. If cash was needed in the coming 12 months, it was raised. 

Staying calm in the face of daily market volatility is not always easy. That is why we are here to help. If you are anxious, never hesitate to contact us with your questions!

Angela Palacios, CFP®, AIF®, is a partner and Director of Investments at Center for Financial Planning, Inc.® She chairs The Center Investment Committee and pens a quarterly Investment Commentary.

Any opinions are those of the Angela Palacios, CFP®, AIF® and not necessarily those of Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Diversification and asset allocation do not ensure a profit or protect against a loss. Dividends are not guaranteed and must be authorized by the company's board of directors. Special Purpose Acquisition Companies may not be suitable for all investors. Investors should be familiar with the unique characteristics, risks and return potential of SPACs, including the risk that the acquisition may not occur or that the customer's investment may decline in value even if the acquisition is completed. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not a guarantee or a predictor of future results. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Are You Prepared to Handle Your Parents’ Estate?

Contributed by: Sandra Adams, CFP®

Clients are increasingly facing the grueling task of handling their parents' financial affairs after their deaths. If their parents worked with professional advisors over their lifetimes, it's very likely that the task of handling the financial affairs and settling the estate can be a relatively straightforward process. However, many clients come to me asking for help with situations in which their parents didn't have things in order and don't know where to start.

What kinds of things are they finding?

Accounts at multiple institutions, sometimes cash accounts, sometimes investment accounts and/or direct stock accounts. We call this "diversification by location" — it did nothing to diversify the actual investment portfolio; it only spread the assets to different providers and custodians, making it that much more difficult for the executor after death to get a handle on the assets.

Accounts with registrations and beneficiaries that haven't been updated. Perhaps Dad passed away ten years ago and your parents had a joint account. Now, Mom has passed away and as you go to settle her estate, you find that there are accounts with both names still on them (Joint accounts that now have two deceased persons on them) or accounts in your Mom's name that still have your Dad listed as the beneficiary. This is not impossible to unravel but can certainly take some time (and paperwork) to get sorted out!

Physical stock and bond certificates. Huh!?! Yes, there are still clients, mostly older, holding physical stock and bond certificates. In many cases, the actual shares had been deposited in an account at a broker-dealer or with a stock transfer agent in a dividend reinvestment program in the past. The trick here is now trying to determine whether the stock certificate is representative of actual shares, if the shares are held elsewhere, or if they were sold at some time in the past and no longer exist. If there are no notes or records that are attached to the certificate, and you cannot track the stock in any of the other investment account holdings, you now need to become somewhat of a detective.

Stock certificates for companies that no longer exist. The same goes for stock certificates showing up for companies that you no longer recognize. Likely, these companies have changed names, merged, or been bought out by other companies. Again, it takes some detective work to find out what happened to the company and whether the "new" company is still something your parent's estate may hold or if it's something that was sold throughout the years.

Collectibles. Signed baseballs. Gold and silver coins. Jewelry. Novelty Collectibles. Rare guns. China. Any and all of these items and so many more are things that clients find in their parents' homes when they're cleaning them out to sell. The difficult part here is that many family members no longer want to keep these things as family heirlooms to pass on from generation to generation. So, there's a need to sell them and pass on the cash. Given that, as the executor, finding the right people and places to provide an accurate value for these types of items can sometimes be a challenge.

Parents' Home. This can often be a challenging situation. Many issues often surround the issue of the home — financial, emotional, and otherwise. If there was no kind of deed (Quit Claim Deed or Lady Bird Deed) in place to provide who the home was to go to or it was not named in a Trust, ownership is likely directed by the Will and the probate court system. One of the biggest processes is going through the home to make sure to find any important documents and valuable family heirlooms. Once those items are removed, there's a process of determining what other items should be kept to be given to family members, what should be donated, what should be recycled, and what should be thrown out. There's another category for families interested — what can be sold in an estate sale — if you feel that there are items of value and are willing to go through the process. The good news is that there are companies willing to be hired to help you do all of that — and they're well worth their price in gold! And once that's done, there's still the process of selling the house, which can be a process of its own.

Are you overwhelmed yet with what you could be facing? We haven't even talked about all of the paperwork there could be. For every account held at every provider, broker-dealer, bank, and insurance company, there's a different set of paperwork that likely requires either a copy or an original death certificate and other documentation. This can include documentation proving your authority to sign and the capacity in which you're serving to represent your parents' estate. And if you're still working (not retired, when this could be your full-time job for the next several months), it could even be more challenging to find the time to get all of this done without the help of professional assistance.

So, what can you do to prevent being in this situation if you're not already there?

Have difficult conversations with your parents about their current financial and legal affairs. Let them know that it would be helpful to understand how their estate is set up and how their financial affairs are structured to ensure that things will be simple and easy to handle as they age. (You can always tell a story about a friend who had to handle things for their parents and struggled because they weren't in order, and you don't want your family to struggle in the same way).

Bring in the help of professionals if and when needed. An estate planning attorney to update documents. A financial advisor to help simplify, organize and put a comprehensive financial and aging plan in place. And both are excellent resources when it comes time to handle your parents' estate —both can provide guidance with steps, help with paperwork, and provide resources as you go through the process.

If you or someone you know is expecting to need to handle their parents' estate in the near future and wants assistance in getting things in order proactively, guiding them to work with professional advisors can be your best advice.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. ® Center for Financial Planning, Inc. ® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Time to File the FAFSA!

Contributed by: Kali Hassinger, CFP®, CSRIC™

Just as parents and students are getting back into the groove of another school year, it's already time to start thinking ahead! The Free Application for Federal Student Aid, better known as the FAFSA, opened for the 2023-2024 school year on October 1. The form helps determine financial aid eligibility for both current and prospective students. Although this is a federal application, it may also be used to apply for many state loans, grants, and scholarship programs.

A New Format

This is the first year a new, shortened version of the FAFSA is being released. The number of questions has been reduced from 108 to 36! Applicants will also be asked to select their role when completing the application. The options are parent, student, or preparer. The Asset Protection Allowance (APA) amount has been effectively reduced to zero, meaning that parental or student assets will be considered more heavily when completing the FAFSA. However, this isn't a shock as the APA has steadily been reduced over time, drifting from $21,400 in 2009 for a single-parent home to $2,500 in 2021 and now officially hitting zero. 

The sooner, the better!

A large portion of available funds is distributed on a first-come, first-served basis, so the earlier you file the FAFSA, the more money is available for loans and grants. While you have until June 30, 2023, to file the FAFSA for the 2023-2024 school year, most state and school deadlines differ. It doesn't matter whether a school has accepted a student at the time of filing. You'll need to elect at least one college to receive the application information, but you can add multiple schools in which you may be interested.

What information do I use?

For the 2023-2024 school year, the FAFSA will use 2021 tax return information. For dependent students, you will need financial information for at least one parent. If your parents are married and/or living together, income and assets for both will be considered. If the parents are divorced and living separately, the custodial parent's information will be reported (whomever the child lives with the majority of the time).

Regardless of the parent's marital status or the student's dependent or independent status, be prepared with W-2s, financial account information, and a 2021 tax return. Even if you don't think you'll qualify for aid, it's important to file the application. Some schools will only consider students for scholarships if they have filed the FAFSA.

Bigger Changes on the Horizon

This October's FAFSA changes were supposed to be more far-reaching than simply a shortened format. In June of 2022, however, it was announced that the rollout of several other changes would be delayed until the 2024-2025 school year (release date of October 2023) to allow more time for technology updates. These changes should provide increased access to Pell Grants (provided to those with exceptional financial need) and reduce the portion of parental or student income expected to pay for school costs.

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kali Hassinger, CFP®, CSRIC® and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Caregivers Try to Balance it All

Contributed by: Sandra Adams, CFP®

The month of September is host to a slew of recognition for caregivers: World Alzheimer’s Day, National Daughter’s Day, Intergeneration Month, and Self-Care Awareness Month.

According to the National Institute on Aging, there are an estimated 11 million unpaid family caregivers in the United States for patients with dementia, including the most prominent form of the disease, which is Alzheimer’s disease. More than one in four Alzheimer’s and dementia caregivers are “sandwich generation” caregivers —they are caring for someone with dementia AND caring for a child or grandchild at the same time. And according to the Alzheimer’s Association, over two-thirds of caregivers are women with nearly 50% looking after at least one parent or parent-in-law. The need for self-care for these family caregivers – often women and often working – is real.

We would all love to believe that, given the opportunity, we would embrace serving as a caregiver for our loved ones — that we would treat the opportunity as “a gift.” In the book Working Daughter: A Guide to Caring for Your Aging Parents While Making a Living, by Liz O’Donnell, the author says:,

Caregiving didn’t feel like a gift to me. It felt like a burden—a burden I didn’t want and one that I wasn’t prepared to handle. I had no warning, no training, and no support. I didn’t realize how many other people I knew were also caring for sick and/or elderly parents. No one in my circle of friends or coworkers was talking about it. As a working mother, I had so many people and resources to draw on for help and advice about everything from how to get a child to sleep to how to balance parenting and career. As a working daughter, I felt alone. And among the few people I knew who were family caregivers, no one was complaining about it. Just me. They must all agree it’s a gift, I thought to myself. I am a horrible, selfish person for thinking it’s a burden.

The reality is that what Liz expresses is not unique. According to a 2017 CNBC report, of the millions of family caregivers out there, almost 60% (58% to be exact), classified the burden of caregiving to be high or moderate. For those caregivers also working and/or raising young families, the percentage is likely to be higher. That feeling of “burden” is likely to lead to stress and feelings of guilt (guilt for feeling the job is a burden and guilt that you are not doing your best at any of your jobs).

Caregivers, for the most part, keep their feelings isolated. They don’t want others to see that they don’t appreciate the opportunity they have to spend this time caring for their loved ones. As a result, they suffer in silence and don’t reach out for help — for themselves or for the resources they need. They may miss out on resources available in the community to provide relief (adult day programs, volunteer programs through local senior programs, Area Agency on Aging programs, Meal Programs, transportation programs, caregiver support programs, etc.). If the caregiver is afraid to admit they need help, they may never know of the programs available to provide relief and assistance.

In addition to bringing awareness to caregiver-specific emotional and psychological struggles, September is the perfect time to bring attention to the financial planning issues that surround caregivers and how these can be addressed.

According to AARP, family caregivers spend an average of 24.4 hours caring for their loved ones in addition to their other responsibilities. For working caregivers, especially women, this means making accommodations to their work to meet the demands of their caregiving roles:

• Requesting a less demanding job 

• Taking unpaid leave 

• Giving up working entirely 

• Taking early retirement

As a result of work accommodations, the result of future wages, according to the AARP Policy Institute (2018) is $324,044 in future wages for women and $283,716 in future wages for men. In addition to wages, health insurance, retirement savings, pension benefits, and Social Security benefits are lost to those who cut back or stop work due to caregiving duties. For those who were on an advanced career track, losing upward momentum by having to slow down or stop work can have a significant impact on future advancement AND wages. And for women, who are typically already behind men in earnings, slowing down or stopping work due to a caregiving role can put them even farther behind their male counterparts. Compound that with the fact that women will potentially live longer, and live longer alone (be widowed), and they’re in a “no win” situation.

Action steps for working women who are also caregivers:

•  Plan ahead as much as possible before the caregiving duties begin. Make sure those you will be caring for have a solid financial and care plan and that as many resources as possible are put in place in advance. 

• Work with your employer to see what arrangements can be made for flexible schedules, paid leave, etc., in order to keep you employed while being able to accommodate your caregiving duties with the least disruption to all areas of your life.

• Make sure you utilize all of your resources, including other family members, caregiver support, and self-care.

• Work with your own financial adviser to plan for the possibility of caregiver duties and consider what different scenarios might look like for your own plan. Look out for your own financial security, as well as for your loved one’s caregiving needs.

Caregivers have a big challenge. They try to do it all and do it all flawlessly — which might not be possible. Create a balanced life where everyone is safe and futures are secure. Planning ahead as much as possible is key to making this happen. Don’t try to do it alone!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Securities are offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc., is not a registered broker/dealer and is independent of Raymond James Financial Services.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Any opinions are those of Sandra D. Adams, and not necessarily those of Raymond James.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

Three Tax-Savvy Charitable Giving Strategies

Contributed by: Lauren Adams, CFA®, CFP®

Lauren Adams, CFA®, CFP®, is a Partner, CERTIFIED FINANCIAL PLANNER™ professional, and Director of Operations at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Lauren Adams, CFA®, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

The Inflation Reduction Act of 2022

Contributed by: Kali Hassinger, CFP®, CSRIC™

In Mid-August, The Inflation Reduction Act was signed into law. This law includes several clean-energy tax incentives, provides additional funding for the IRS, extends Affordable Care Act subsidies, implements a minimum corporate tax, and, for the first time, gives Medicare the power to negotiate prescription costs. Although there is doubt whether these provisions will reduce the current historically high inflation rates, the law provides support that is viewed as a breakthrough in climate-related policy.  

• Energy and Climate Change Investments: Tax credits for individuals are extended to households that invest in energy-efficient home improvements. The credit is equal to 30% of the amount paid or up to $1,200/year for these improvements (an increase from the previous 10% rate). A $7,500 clean vehicle credit will be available for those who purchase a vehicle assembled in North America. The credit is allowed for cars with an MSRP of $55,000 or less and vans, SUVs, and trucks with an MSRP of $80,000 or less. (Before you run out and buy an electric car for the tax credit, make sure it qualifies. A list provided by the U.S. Department of Energy can be found here.)

• IRS Funding: Reports of the IRS being underfunded and backed up has been heard for several years. The Inflation Reduction Act provides billions of dollars to the IRS over the next ten years to increase their workforce, update technology, and hopefully work through the accumulated backlog. 

• Affordable Care Act Subsidies: The Inflation Reduction Act extended the premium tax credits for those enrolled in an Affordable Care Act insurance plan and whose income is up to 400% above the poverty line through 2025.  

• Minimum Corporate Tax: The Act introduces a new corporate alternative minimum tax (AMT) on companies with income of more than $100 million per year. The 15% tax will be applied to excess income over a corporation’s AMT foreign tax credit for the year. 

• Stock Buyback Excise Tax: In 2023, companies who purchase more than $1 million of their stock in a share repurchase program will be subject to a 1% excise tax.

• Medicare Costs: The Inflation Reduction Act hopes to reduce out-of-pocket drug-related Medicare expenses by capping the annual limit. The out-of-pocket costs will be reduced to $4,000/year or less in 2024 and are set to be reduced again to $2,000/year in 2025. It requires the government to negotiate with drug manufacturers to lower prices, and it requires drug companies to pay Medicare in rebates if the cost of a drug increases at a rate higher than inflation. 

The list above is not exhaustive and does not include several other corporate clean-energy provisions, additional expanded Medicare benefits (insulin cost cap and free vaccinations), and, ultimately, hopes to reduce carbon emissions by 40% over the next eight years. 

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Summer 2022 Economics Summarized in 5 Charts

Contributed by: Angela Palacios, CFP®, AIF®

Is inflation transitory again? Transitory was struck from the Federal Reserve's language after inflation didn't dwindle for a few months. But depending on your definition of short and long-term, it could still be viewed as transitory. Headline inflation was lower than expected for July, and most of the reduction came from energy. You can see the breakdown by month below.

Source: JP Morgan Weekly market update, BLS, FactSet

Unemployment hits a multi-decade low. This equates to difficulty in the hiring process for firms. Job openings are declining, but there are still two job openings for each unemployed person.

Source: Raymond James Weekly Headings

Source: U.S Department of Labor, J.P. Morgan Asset Management. *JOLTS job openings from February 1974 to November 2000 are J.P. Morgan Asset Management estimates.  J.P. Morgan Guide to the Markets – July 31, 2022.

Mortgage rates spiked and are coming back down, helping the affordability of buying a home again.

Source: Raymond James Weekly Headings

Yield curve inversion continues to steepen. There's much focus on the yield curve as it's usually an early signal for the economy slipping into recession (although technically, this definition has already been met with two negative quarters of GDP). This spells trouble for banks as they have to pay higher interest rates on short-term customer deposits like Certificate of Deposits but earn less on mortgages, for example. This money-losing gap can prompt banks to tighten up on lending.  

Angela Palacios, CFP®, AIF®, is a partner and Director of Investments at Center for Financial Planning, Inc.® She chairs The Center Investment Committee and pens a quarterly Investment Commentary.

The information contained in this letter does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Angela Palacios, CFP®, AIF® and not necessarily those of Raymond James. Expression of opinion are as of this date and are subject to change without notice. There is no guarantee that these statement, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Individual investor’s results will vary. Past performance does not guarantee future results. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.

The Center: A Crain’s Detroit Cool Place to Work for Sixth Year

Contributed by: Center for Financial Planning, Inc.®

We’re happy to announce The Center has been awarded Crain’s 2022 Cool Places to Work* in Michigan for the sixth consecutive year!  Crain’s Cool Places to Work was designed to identify, recognize, and honor the best places of employment in Michigan. The 2022 Cool Places to Work in Michigan list is made up of 100 companies in three size categories: small (15-49 employees), medium (50-249) and large (250+). Companies from across the state entered the two-part process to determine the Cool Places to Work in Michigan. The first part consisted of evaluating each nominated company’s workplace policies, practices, and demographics, and the second part consisted of an employee survey to measure the employee experience. The combined scores determined the final rankings.

THE CENTER WAY

The Center team has spoken, and it’s evident we’re all proud of benefits like professional development, education reimbursement, workplace committees, and social events. Our fun culture is developed over ping-pong tournaments, chili cook-offs, and volunteer work.

TEAMWORK DURING A PANDEMIC

“We are especially proud of how we’re managing the curveball 2020 threw us. When COVID-19 hit, we transitioned to working remotely and formed a response committee tasked with making the office a safe place to return to,” said Lauren Adams, CFA®, CFP®.

Managing office culture remotely comes with its difficulties, but none were significant enough to break the incredible community our office has developed.  We’ve started a book club to keep engaged and even brought in a little competition with our stock education bracket-style game, Market Madness and health challenges throughout the pandemic.  The health challenges helped keep the COVID 15lbs at bay.

Ultimately, The Center is a cool place to work because each team member contributes to a caring and positive workplace.

This ranking is not based in anyway on the individual's abilities in regards to providing investment advice or management. This ranking is not indicative of advisor’s future performance, is not an endorsement, and may not be representative of individual clients' experience. Raymond James is not affiliated with Crain’s.

Student Loan Forgiveness Announced

Contributed by: Kali Hassinger, CFP®, CSRIC™

On Wednesday, August 24th, President Biden announced a highly anticipated plan to forgive a portion of student loan debt for approximately 43 million borrowers. He also extended the pandemic-driven student loan repayment freeze through the end of the year.

For single taxpayers making less than $125,000/year and Joint or head of household taxpayers making less than $250,000/year, $10,000 of their current student loan balance will be forgiven. For those with Pell Grant debt who meet these income requirements, $20,000 will be forgiven. Pell Grants were given to students with "exceptional financial need." The annual amount of this type of grant awarded is capped at $6,895 for the 2022-2023 school year, and the limit has historically been lower with slight increases each year.

Regardless of the loan type, the amount forgiven will be tax-free. However, whether eligibility will be phased out based on income or a cliff (meaning income $1 over the limits would eliminate eligibility) is unclear.

Loans taken out after June 30th, 2022, will not qualify for this relief. However, current college students who are still considered dependents will be eligible for forgiveness based on their parent's income.

Details on how to apply for forgiveness are still pending, with the understanding that an application will be available before the December 31st repayment freeze ending date. The need to submit an application and certify income will likely be required. Those repaying their student loans through an income-driven repayment plan must certify income yearly. There's also the possibility that some portion of loans will automatically be forgiven if the Department of Education has current and relevant income data. We expect that additional and more detailed guidance will be released in the coming weeks.

Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kali Hassinger, CFP®, CSRIC® and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.