January 16, 2019
Welcome to our first newsletter of 2019. While I would not want to wish my life away, I am glad to put 2018 in the rear-view mirror. Leaving December was like finally getting around that slow-moving truck you’ve been stuck behind for the last 10 miles.
As far as markets go, Decembers are a bit strange anyway. Advisors around the country are selling losers for tax-loss harvesting. Mutual Funds and ETF’s must declare and pay-out their Capital Gains in December which increases cash balances but MF fund balances fall. Then lastly, no advisor or institutional investor really wants to reach down to buy any position in December that had negative issues during the year. (They know the position will appear on the December statement and there is little reason to create more investor consternation in an already poor year. This is window dressing in reverse.)
In 2019 we have a new canvas and hopefully, we can get back to normal. The first two weeks of January have been fantastic and some of those December idiosyncracies have already worked themselves out.
The IRS gives us some extra room to save money in our retirement plans:
Regular & ROTH IRA’s increase to $7,000 (over 50) and $6,000 if under 50 YOA.
401K, 457, and 403B’s increase to $25,000 (over 50) and $19,000 if under 50 YOA.
SIMPLE Plans increase to $16,000 (over 50) and $13,000 if under 50 YOA.
And what the IRS gives with one hand they take with the other. The Social Security wage base increases in 2019 to $132,900. So if you’re self-employed (and you earn that much) that’s an increase of $558 in SS taxes this year. If you’re an employee you pay an extra $278 and your employer pays an extra $278. I guess they need to pay for that 2.8% COLA that starts with the January SS checks.
Speaking of taxes, I hope you’re putting aside all the tax forms and documents you’re receiving in the mail. We throw ours in a manilla folder until sometime around March 1 we organize it into a slightly less disheveled packet to drop off at our CPA’s office.
This is the first return under the new tax law and things will be much different for many taxpayers. I would be most interested in how it works out for you. Personally, I think the Knight household will end up paying about the same rate—we got some breaks, and we lost some breaks.
That’s about all I have for this month’s letter. The last quarter was bad for the market—but unless we had to sell we haven’t locked in any losses and our upcoming February rebalance should come with some pretty cheap prices.
Thank you for reading.
Marty
Day 1,743
