TPW Trending Today

The Build Back Better Bill tax changes – do you stand to pay MORE, or less?

Will the Build Back Better bill tax changes translate to an unexpected de-facto holiday bonus, or instead, an unwelcome lump of coal? Read on to find out more!

While Build Back Better is a good marketing slogan, it is obviously important to unpack and better understand what this 2,135 page, $1.75 trillion piece of spending and legislation might mean for YOU. What exactly are the key provisions of this signature bill, and importantly, will the proposed Build Back Better Bill tax changes cause you to pay MORE or LESS to Uncle Sam if the proposed legislation passes?

Let’s briefly “unpack” the Build Back Better Act, discuss which provisions are NOW being negotiated in the Senate, and importantly, evaluate the potential Build Back Better bill tax changes, and the tax consequences of what a final package might look like.

First, a brief background. The Build Back Better Act is the third and most economically significant part of President Biden’s Build Back Better Plan. Originally an immense $3.5 trillion social spending package, lawmakers in the House of Representatives have scrambled and negotiated over the past six months, finally ending up here – approving and sending to the Senate a “slimmed-down” (but hardly modest) $1.75 trillion (!) version of the plan. Now, the REAL debate and negotiations begin.

With two noteworthy holdouts…

…Senate Democrats are mostly united in passing this major legislation, but haven’t yet been able to agree on what should be kept and what should be scrapped to obtain the two needed votes from the aforementioned holdouts. On the flip side, and unsurprisingly in today’s partisan political atmosphere, all 50 Senate Republicans are aligned against it.

Now, regardless of whether you are a Democrat or a Republican, and regardless of whether you agree or disagree with the need to pass this IMMENSE bill, at Towerpoint Wealth we believe that it is a when, and not an if, some version of this legislation ultimately DOES pass and become law, even if it isn’t until 2022. And while the final terms are obviously still unclear, the bill is proposing to make MAJOR changes to four main areas:

1. Social services and programs
2. Clean energy
3. Immigration
4. Build Back Better bill tax changes

And as Joe Manchin, Senator from West Virginia and one of the two Democratic holdouts who is squarely in the middle of this debate, said earlier about the bill, “We should be very careful what we do. We get any of these wrong, we’re in trouble.”

If you are interested in a deeper breakdown of the first three areas (as well as Build Back Better tax changes highlighted below), we encourage you to click the thumbnail below and watch our newly-produced educational video:

Today’s Trending Today is specifically focused on the proposed Build Back Better bill tax changes, which would raise a SIGNIFICANT amount of tax revenue from the very wealthy and corporations, and also offer a proposed tax cut for those who live in high income and mostly blue tax states.

The Congressional Budget Office (CBO) estimates the bill will cost a total of almost $1.7 trillion, and add $367 billion to the federal deficit over 10 years. Adding in $207 billion of revenue that is estimated to result from increased tax enforcement in the bill, and the net total increase to the deficit is projected to be $160 billion.

Originally, President Biden’s initial Build Back Better plan was to raise taxes on families earning more than $400,000/year, which would have overturned the Tax Cuts and Jobs Act passed in 2017. However, this provision was dropped in the final version of the bill passed by the House of Representatives on November 19, as holdout Democratic Senator Kyrsten Sinema of Arizona balked at it, saying she wouldn’t accept any additional higher tax rates: not for individuals, not for capital gains, and not for corporations.

Instead, a significant and updated House-passed Build Back Better bill tax change imposes surtaxes on taxpayers with extremely high incomes. When would this surtax kick in? When adjusted gross income eclipses $10 million, a 5% surtax on income would be applied. Additionally, taxpayers would be subject to an additional 3% surtax on any income over $25 million. Clearly these proposed Build Back Better bill tax changes would only be punitive to very high income earners.

Something else to keep in mind – the new surtaxes applicable to the $10 million and $25 million adjusted gross income thresholds INCLUDES capital gains taxes. So, if you have owned highly appreciated securities (think Apple or Tesla or Amazon stock) for a long time, and then sell your shares and realize a large capital gain, that income is also included when calculating whether or not you would be subject to them.

Additionally, another major Build Back Better bill tax change would be to INCREASE the state and local income tax deduction, commonly known as the SALT deduction.

The SALT deduction is a tax deduction that allows taxpayers of high-tax states to deduct local tax payments on their federal tax returns. Before 2017, there was no limitation on the SALT deduction. However, under the Trump administration’s Tax Cuts and Jobs Act, the SALT deduction was CAPPED at $10,000. The Build Back Better bill tax change to SALT proposes a new INCREASED deduction limit of $80,000, benefitting wealthier residents of high-tax blue states like California, New Jersey, and New York.

This change would cost the government $229 billion in revenue, and was not part of Biden’s original BBB plan – it was added later in the House negotiations.

Backdoor Roth IRA conversions, a popular technique oftentimes used to fund a tax-free Roth IRA without being subject to the Roth IRA income limitations, would also be eliminated as another Build Back Better bill tax change.

And lastly, income recognized on cryptocurrency transactions would be subject to 1099 reporting by crypto brokers and custodians.

Here is a visual summary of the Build Back Better bill tax changes:

Head spinning yet? Obviously the myriad of proposed Build Back Better bill tax changes is a lot to keep track of. However, at Towerpoint Wealth, that is exactly what we continue to do on a regular basis.

Considered by some to be the most consequential economic legislation in the past 50 years, negotiations on the Build Back Better bill are far from over. And any tweaks to this massive legislation will then require another vote in the House. However, regardless of how and when this situation plays itself out, we feel it is safe to say that YOU WILL feel the effects of at least one component of the proposed Build Back Better bill tax changes, and encourage you to contact us to have an objective conversation about how you will be positively or negatively affected by the tax changes you will personally see from this bill.

What’s Happening at TPW?

A huge thank you to Ascent Builders for the AMAZING holiday wreath, and perhaps an even better gift, the personal delivery from their esteemed controller, Patty McElwain (holding the wreath and standing next to our phenomenal Client Service Specialist, Michelle Venezia)!

Spreading cheer is an Ascent Builders specialty, and they are a firm we feel very fortunate to have such a long and productive partnership with.

Our President, Joseph Eschleman, spent some time earlier this month celebrating Christmas (yes, that is a Griswold Family Christmas t-shirt he is wearing!) with close Towerpoint Wealth friend and business partner, Niki Dawson. Niki is the President of TaylorMade Web Creations, and she is absolutely amazing if you have any web design and/or digital marketing needs!

Graph of the Week

Tesla’s market value is now more than General Motors, Ford, Volkswagen, and Mercedes-Benz, COMBINED!

The below chart indicates that electric vehicle sales will exceed gas-powered vehicles by 2040 – do you agree? Disagree?

Cartoon of the Week

We came across this gem that provides a different and unique “take” capturing the essence of what perseverance means, and felt compelled to share!

Illustration of the Week

Surprisingly, in the wealth management industry, there are two different standards of care for clients:

1. The fiduciary standard – a legal obligation requiring a financial advisor to act solely in a client’s best interest, 100% of the time, when offering personalized financial advice, counsel, and planning
2. The suitability standard – a much lower legal hurdle to clear than fiduciary, not obligating a financial advisor to put their client’s best interests first, and instead only requires a reasonable belief that a recommendation is “suitable” for a client

While we believe that consumers and clients are harmed with the absence of a uniform fiduciary standard that applies to ALL financial professionals, this is the world we live in. A non-fiduciary is legally allowed to sell you a product or investment that pays the highest commission, as long as it is considered suitable.

If you have an advisor who works for any of these firms, he or she is NOT a fiduciary to you. Conversely, if you are working with an advisor at a fully-independent, SEC-regulated investment advisory firm (such as Towerpoint Wealth), he or she IS a fiduciary to you!

Put differently…

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Underlining the dramatic surge in infections the country continues to see, the U.K. reported a record number of new daily COVID-19 cases on Wednesday, with 78,610
• The U.S. House of Representatives voted on Tuesday to hold former White House chief of staff Mark Meadows in contempt, over defiance of January 6 Committee subpoena
• Businesses, employers, and universities begin mandating COVID-19 booster shots
• The rematch? Hillary vs. Trump in 2024?
• Steph Curry gives new Rolexes to Draymond Green and Andre Iguodala after sinking his 2,974th career 3-pointer, breaking Ray Allen’s NBA record
• Iconic American musician Bruce Springsteen reportedly sold his full song and publishing catalog to Sony Music for a whopping $500 million
• Hackers linked with governments of China, Iran, North Korea, and Turkey are exploiting a critical flaw in software used by big tech firms around the world

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

 Joseph Eschleman, Jonathan, Steve, Lori, Nathan, and Michelle

We love social media, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us with your favorite charity, and we will happily donate $10 to it!

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According to a 2021 survey conducted by The Harris Poll, about 26% of Americans say their most trusted source for financial advice is a financial advisor, representing an 18% increase from 2020.

With a direct correlation to the shakeup and uncertainties caused by the COVID-19 pandemic, and the highly unsettled nature of the U.S. economy, financial markets, and politics still existing today, it comes as little surprise to see this increasing trust and confidence in the counsel of financial advisors.

Conversely, it is also interesting to note that the most trusted source of financial advice known as “Yourself” experienced a 33% drop (!) from 30% in 2020 to 20% in 2021.

Ask virtually any financial advisor: The data presented above supports the anecdotal evidence – during periods of high volatility and uncertainty, people tend to become uncertain and trust themselves less when it comes to their finances and investing. Conversely, in periods of low volatility, rising markets, and higher (perceived) certainty, people become overconfident. Or, illustrated differently:

Why do investors feel smarter and more confident when the markets are rising, and dumber and less confident when the markets are declining? One word: emotions. At Towerpoint Wealth, we believe that one of the central qualities of a skilled financial advisor is the ability to help their clients remain objective, avoid overconfidence, or, on the flip side, depression and hopelessness.

There are more than 275,000 licensed professionals in the United States right now that have “Financial Advisor” (or some derivation thereof) on their business card, according to the Bureau of Labor Statistics. And as is true of many professions, there are a myriad of makes, models, specializations, and niches that these advisors fall into. Additionally, these 275K financial advisors represent a varying cross-section of experience, planning, knowledge, and service.

A core philosophy here at Towerpoint Wealth has always been to focus on and place energy into the professional growth and development of our advisors. Our clients deserve and expect us to not only stay sharp in regards to current economic, financial, and investment trends and developments, but also to consistently be “sharpening our professional saws” in the areas of practice management, behavioral finance, client service, and leadership.

To that end, our President, Joseph Eschleman, our Partner, Wealth Advisor, Jonathan LaTurner, and our Director of Research and Analytics, Nathan Billigmeier, traveled to Music City last week for a three-day Investments Forum, hosted by Dynasty Financial Partners. The venue, the lineup of talent, and the level of content were truly amazing, and the TPW colleagues spent an enriching and enjoyable three days sharpening their professional saws at the conference.

The highlights included:

• Managing Diverse Portfolios for Diverse Investors: A responsible investing/ESG “deep dive” with Amanda Baker Kahn from Ethic Investments, along with Michelle Gadsden-Williams from BlackRock and Yasmin Landyfrom Fidelity
• A Fireside Keynote – with the 43rd Governor of Florida, Jeb Bush
• Born to Lead – a CEO Breakfast with NBA Champion Avery Johnson
• Entrepreneurs Building Transformative Companies – with Steve Case, America Online co-founder, and Chairman and CEO of the D.C.-based venture capital firm Revolution
• Uncovering Investment Opportunities Around the Globe – with the legendary Howard Marks, Co-Chairman of Oaktree Capital
• Macro Economics Virtual Fireside Chat – with Liz Ann Sonders, Charles Schwab’s Chief Investment Strategist
• Keynote with Daymond John – the entrepreneurial and life journey of FUBU’s founder and Shark Tank’s one and only!
• A Conversation Like Any Other – with Jim Nantz, legendary CBS Sports commentator

Click the thumbnail below to see the full agenda of speakers, activities, and content that, in addition to some Music City fun during the evenings, kept Joseph, Jonathan, and Nathan moving for three days!!

Steve Case

Photo boxes, clockwise from upper left: 1.) Jim Nantz 2.) Joseph, Nathan, Jonathan at Loser’s Bar and Grill in Nashville 3.) Howard Marks, Daymond John, Liz Ann Sonders

New Towerpoint Wealth White Paper

After focusing on the topic in our 11.9.2021 edition of Trending Today, our Director of Tax and Financial Planning, Steve Pitchford, authored and published the below white paper, focusing on THREE key ideas to potentially reduce the tax “sting” associated with IRA and other tax-deferred retirement account required minimum distributions (RMDs).

Click here to download and read this brand-new report!

Video of the Week

Our President, Joseph Eschleman, CIMA®, was the featured guest on Laurel Sagen and Shasta Escalante’s Heart 2 Biz podcast earlier this month.

Heart 2 Biz is a weekly podcast focused on local Sacramento professionals and entrepreneurs who “pour their hearts into their businesses.” Focused on finding out not only how people are building and running their businesses, but how they are doing so with integrity and heart.

Click below to watch the podcast, and to hear Joseph’s story of how the permanent Pennsylvania-to-California cross-country adventure he took in 1999 helped to shape his heart and him as a person; and, how his evolution from employee to business owner and entrepreneur has molded his character and overall outlook on life. It’s a great (and crazy!) story with plenty of interesting twists and turns, confirming what virtually every Towerpoint Wealth client already knows to be true – that the energy Joseph pours into his client partnerships and into Towerpoint Wealth has a foundation based on both integrity and on heart!

What’s Happening at TPW?

The ladies of Towerpoint Wealth (our Client Service Specialist, Michelle Venezia, and our Director of Operations, Lori Heppner) enjoyed a nice lunch together earlier this week at Il Fornaio in downtown Sacramento, right here on Capitol Mall!

In Denver this past Sunday with two friends, our President, Joseph Eschleman, enjoyed watching his favorite football team, the Philadelphia Eagles, dismantle the hometown Broncos, 30-13!

A happy moment for our Director of Tax and Financial Planning, Steve Pitchford, our Director of Operations, Lori Heppner, and our Director of Research and Analytics, Nathan Billigmeier.

Charts of the Week

Rivian (Nasdaq: RIVN), the newly-public electric vehicle automaker (backed by Amazon) hit a market capitalization of $100 billion earlier this week – and they haven’t (yet) delivered a single vehicle! This is the largest U.S. IPO since 2014, when Alibaba went public, and makes the company bigger than both GM and Ford.

In the eyes of many investors and market pundits, this further cements the idea that traditional automobiles and automobile manufacturers are going the way of the dodo:

Quote of the Week

Excellent philosophy from IBM’s long-time chairman and CEO, Thomas J. Watson…

Cartoon of the Week

In the spirit of what we discussed above about investor (over) confidence, the below cartoon thoughtfully illustrates one of Warren Buffett’s famous quotes:

“You need to divorce your mind from the crowd.”

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• The surface elevation of Folsom Lake is just 370 feet, the lowest level since December 2015, and just 22% full
• Two arrested on the steps of the Kenosha County Courthouse amid deliberations in the Kyle Rittenhouse trial
• The NFL is increasing COVID protocols ahead of Thanksgiving
• An update to the Belarus/Poland border and migrant crisis
• A federal appeals panel on Saturday temporarily blocked a new coronavirus vaccine mandate for large businesses, in a sign that the Biden administration may face an uphill battle in its biggest effort yet to combat the virus among the American work force
• A Boy Scout uses his skills to help rescue a couple and their injured dog on a Hawaii trail
• Taiwan deploys advanced fighter jets amid tensions with China

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

We love social media, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us with your favorite charity, and we will happily donate $10 to it!

Click HERE to follow Towerpoint Wealth on LinkedIn
Click HERE to follow Towerpoint Wealth on Facebook
Click HERE to follow Towerpoint Wealth on Instagram
Click HERE to follow Towerpoint Wealth on Twitter
Click HERE to follow Towerpoint Wealth YouTube
Click HERE to follow Towerpoint Wealth Podcast A Wealth of Knowledge

How would you like to be FORCED to take extra, unwanted, and unnecessary taxable income that would ADD TO your taxable income for the year and potentially catapult yourself into a higher income tax bracket?

If you are 72 or older and own an IRA or tax-deferred retirement account and receive required minimum distributions (RMDs), this may be happening to you every single year. If you are not yet 72, take this as fair warning – you have time to plan and put some tax saving solutions in place!

Many individuals know well enough that RMD taxes are a “necessary evil” of contributing to, and investing in, retirement accounts such as 401(k)s, IRAs, 403(b)s, etc. However, what investors often fail to realize is that there are impactful and proactive tax planning strategies that can materially lessen the sting of these RMD taxes.

As discussed below, short of enacting a QCD every year for the full amount of your RMD (do the acronyms have your head spinning yet??!!), there is no way to outright avoid paying income taxes on your IRA and retirement account RMDs. However, at Towerpoint Wealth, we are proactive in working with our clients to reduce the pain associated with RMD taxes if and when possible, usually utilizing one or more of the following three planning opportunities, each of which can help:

Tax Saving Solutions

1. Accelerate IRA withdrawals

We get it, as this sounds counterintuitive. Take more money out to save on taxes?? The short answer – yes.

Subject to certain exceptions, age 59 ½ is the first year in which an individual is able to take a distribution from a qualified retirement plan without being subject to a 10% early withdrawal tax penalty.

Consequently, the window of time between age 59 ½ and age 72 becomes an important one for proactive RMD tax planning. By strategically taking distributions from pre-tax qualified retirement accounts between these ages, an individual may be able to lessen their overall lifetime tax liability by reducing future RMDs (and the risk that RMDs may push them into a higher tax bracket) by reducing the retirement account balance.

This strategy becomes particularly opportune for an individual that has retired before age 72, as it often affords the individual the ability to take these taxable distributions in a uniquely low income (and lower income tax) period of time.

2. Execute a Roth conversion

A Roth conversion is a retirement and tax planning strategy whereby an individual transfers, or “converts,” some or all of their pre-tax qualified retirement plan assets from a Traditional IRA into a tax-free Roth IRA.

While ordinary income taxes are owed on any amounts of tax-deferred contributions and earnings that are converted, a Roth conversion, when utilized properly, is a powerful tax planning strategy to reduce a future IRA RMD, and concurrently, RMD taxes, as Roth assets are not subject to required minimum distributions since they generate no tax revenue for the government. Further, Roth conversions also 1) maximize the tax-free growth within a taxpayer’s investment portfolio, 2) provide a hedge against possible future tax rate increase (as Roth retirement accounts are tax-free), and 3) leave a greater tax-free financial legacy to heirs.

3. Use the IRA RMD to make Qualified Charitable Distributions (QCDs)

When an individual becomes subject to an IRA RMD, in lieu of having the IRA distributions go to them, they may consider facilitating a direct transfer from their IRA to one, or more, 501(c)3 charitable organizations (up to $100K annually). This is known as a Qualified Charitable Distribution (QCD).

As long as these distributions are made directly to the charity, they 1) satisfy the RMD and 2) are excluded from taxable income.

This strategy, when executed property, results in a dollar-for-dollar income reduction compared to a “normal” RMD.

Fortunately or unfortunately, there is no magic bullet nor panacea when it comes to RMD taxes and the income tax obligation you will have when taking RMDs. However, we feel that you still have an obligation to be aware and/or mindful of the planning opportunities mentioned above, as potentially reducing your income tax liability is certainly better than paying “full boat” every year!

Video of the Week

As a follow up to the subject focus of our most recent 10.15.2021 Trending Today newsletter, click the thumbnail below to watch the educational video we just produced last week, featuring our President, Joseph Eschleman, as he discusses the THREE key ingredients that are crucial when working to successfully build and protect your wealth, and SEVEN specific long-term investing strategies and philosophies that need to be developed and internalized if you truly want to be a successful long-term investor.

What’s Happening at TPW?

We love and are proud of the work hard, play hard culture we have built here at Towerpoint Wealth, and in the spirit of that philosophy, the TPW family took a ½ day “Teambuilding Tuesday” earlier this week, enjoying lunch together at The Station Public House in Auburn, followed by fun and games (literally!) at Knee Deep Brewing Company!

Our President, Joseph Eschleman, gave two (!) pints of A- last week, with a “Power Red” blood donation at the American Red Cross in Sacramento.

Graph of the Week

There are just under two months left in the year, and from strictly a seasonal perspective, November and December have historically been two of the better months on the calendar. The chart below shows the S&P 500’s performance during the last two months of the year in the post-WWII period. Overall, the median performance has been a gain of +3.72%, with positive returns just over three-quarters of the time (76.3%).

The S&P 500’s 22.6% gain this year is the strongest year-to-date reading through October since 2013. 2021 is just the tenth year since 1928 where the S&P 500 has been up more than 20% YTD through October. In the chart above we have highlighted each of those years in dark blue.

Quote of the Week

It is easy to be an investor when things are relatively “normal” and calm; it becomes much more difficult to be disciplined and stay objective when things get crazy…

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Republican Glenn Youngkin defeats Democrat Terry McAuliffe in the closely-watched Virginia governor’s race on Tuesday night
• CDC now recommends that children between the ages of 5 and 11 years receive the Pfizer-BioNTech pediatric COVID-19 vaccine
• The Atlanta Braves won their first World Series championship since 1995, hammering the Houston Astros 7-0 on Tuesday night in Game 6
• Amid growing concerns about the technology, Facebook said it will shut down its face-recognition system and delete the faceprints of more than 1 billion people
• Investigation continues into Alec Baldwin’s fatally shooting of cinematographer Halyna Hutchins on a movie set October 21
• World leaders outline climate commitments at COP26 summit
• UK authorizes Merck COVID-19 antiviral pill, the first pill shown to successfully treat COVID-19

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

We think social media is fun, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us
with your favorite charity, and we will happily donate $10 to it!

Click HERE to follow Towerpoint Wealth on LinkedIn
Click HERE to follow Towerpoint Wealth on Facebook
Click HERE to follow Towerpoint Wealth on Instagram
Click HERE to follow Towerpoint Wealth on Twitter
Click HERE to follow Towerpoint Wealth YouTube
Click HERE to follow Towerpoint Wealth Podcast A Wealth of Knowledge

“I’m definitely a long-term investor.”

“I don’t get worried about the negative news headlines.”

“Declines happen – I get it.”

We have heard these lines uttered by the most well-intentioned and intelligent investors time and time again. Sometimes, they hold true to their word. Sometimes, the polar opposite. Saying you are a long-term investor is easy; behaving like a long-term investor is much more difficult, as this is clearly easier said than done. 

Put differently, as the great boxer Mike Tyson said: 

When things are relatively “normal,” investing seems easy. However, when things get (pick your favorite adjective): crazy, volatile, unbelievable, explosive, unpredictable, turbulent, harrowing, and/or unsettling, it becomes much more difficult to tolerate, endure, and absorb a major body blow to your “nest egg” (read: a consequential drop in value). Watching your money SHRINK can be a very emotional and traumatizing experience. And while there is no perfect recipe for becoming a successful long-term investor, at Towerpoint Wealth we believe it all starts with three basic ingredients: 

1. Consistent objectivity
2. Measured behavior
3. Disciplined thinking and execution

In addition to the inherently emotional nature of money, there are a myriad of uncontrollable variables populating the external environment we live in: The movements of the stock market. The vicissitudes of the US and global economy. The fickle nature of the political winds. Increases and declines in interest rates, income taxes, and inflation. Just a few examples from a very lengthy list of items that are out of our control. And while it is human nature for us to think (even to outright believe) that we have some control over many of these things, the truth is, if we want to truly be a successful long-term investor, we must recognize and accept the things we do not control.

At Towerpoint Wealth, we believe that the most successful long-term investors and wealth-creators have a somewhat-unique capability, a skill, that allows them to maintain appropriate perspective, to exhibit a high degree of humility, and to be laser-focused on the bigger picture. Fortunately, this is a skill that can be coached, cultivated, and learned, and is something that we have a relatively high degree of control over.

Long-Term Investor

Let’s make this more tangible – below are seven key principles that, at Towerpoint Wealth, we believe are necessary to be a successful long-term investor:

1. Be humble, be aware of, and accept, things that are out of your control
2. Keep your emotions in check, and be acutely self-aware of the fear and greed that we may feel when considering our finances and investments, especially in periods of extremes
3. Plan to live a long life, which we do have some control over!
4. Einstein was right: The power of compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays
5. Volatility should be expected, embraced, and taken advantage of, not feared nor averted
6. Unless you have the unique ability to consistently AND accurately predict the future, stay properly invested and diversified, regardless of what you believe may happen in the market and in the economy
7. Have a plan and a strategy, and be disciplined in sticking to it, regardless of the things you have no control over

In opining about what we believe it takes to be a successful long-term investor, we would be remiss if we did not directly integrate Warren Buffett’s (aka the “Oracle of Omaha”) wisdom on this subject into this newsletter. Please click below to watch an excellent YouTube video, featuring a 2016 CNBC interview of Warren, where he outlines his FIVE best tips for successful long-term investors:

Do you have a plan to properly manage and coordinate all of your financial affairs and a strategy to grow and protect your wealth and investment portfolio, even during turbulent times?

If so, are you being disciplined in consistently following it? If you have concerns, or simply would like to discuss how you can apply the long-term investment principles discussed above, we welcome having a conversation with you. Contact Towerpoint Wealthalth and message us, as we regularly have no-strings-attached conversations about these issues, and are happy to be an objective resource for you as you begin to consider your personal and financial circumstances further.

What’s Happening at TPW?

Our Director of Research and Analytics, Nathan Billigmeier, took last Friday off to spend time in Wheatland, CA at Bishop’s Pumpkin Farm with his two boys, Ethan and Grayson, specifically helping Grayson celebrate his 2nd birthday!

Our President, Joseph EschlemanJoseph Eschleman, devouring a Philly cheesesteak (the only way a cheesesteak should be ordered, a “wiz, wit”) before jumping on a flight back to Sacramento earlier this month. Fuhgeddaboudit if you think you will find a better cheesesteak than Pat’s!

Graph of the Week

Yikes – inflation is at a 13 year high!

If you have any exposure to bonds in your portfolio, we strongly feel that it is time to take a hard look at:

How you are allocated within bonds

Your exposure to interest rate fluctuations (specifically, to rates going UP) due to inflation

Whether the risk you are taking is appropriate for your set of unique personal and financial circumstances

At Towerpoint Wealth, we have been successfully modeling what the value of a client’s portfolio would look like if interest rates INCREASE by ½, 1, or even 1 ½% over the next year or two. Message us by clicking HERE if you would like this custom analysis done for you.

Cartoon of the Week

Issues with global supply chains will impact the holiday season…

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Inflation spike! Social Security announces +5.9% COLA for 2022
• The weekend cancellations of more than 2,000 flights were “not a result of Southwest employee demonstrations,” Southwest spokesman Chris Mainz said Monday
• What is this “Squid Game” everyone is talking about? “Squid Game,” is a Netflix drama about adults competing in deadly children’s games for a chance to escape debt
• A two-headed, six-legged baby turtle is thriving at a Massachusetts wildlife center
• A twin-engine Cessna C340 crashed into the residential neighborhood in the San Diego suburb of Santee and destroyed two homes and damaged nearly a dozen more
• DC Comics this week announced that Jon Kent, the son of Clark Kent and Lois Lane, will come out as bisexual
• Treasury Secretary Janet Yellen says there could be shortages of goods and services in the coming months as supply chain issues continue to mount

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

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Lots of talk. Lots of posturing. Lots of sound bites. But not a lot of action (so far, at least). A familiar refrain? It is, when it comes to our elected officials in Washington D.C.

In today’s Trending Today newsletter, we are going to explore the $1.2 trillion bipartisan infrastructure bill, the $3.5 trillion infrastructure plan details, and, perhaps most importantly to investors, the potential federal income tax increases that may occur if and when either, or both, of these massive bills become law.

Legislators are taking a two-step approach in their efforts to pass President Biden’s ambitious jobs and infrastructure program, some provisions being Republican-friendly, and some Democrat-friendly. This two-track plan to pass this legislation works as follows: Put the GOP-friendly items in a $1.2 trillion bipartisan infrastructure bill that could pass on a bipartisan basis, and then put the rest in a much larger $3.5 trillion infrastructure bill that would attempt to pass on a party-line vote, via what is known as budget reconciliation, which only requires a simple majority to pass it.

The $1.2 trillion bipartisan infrastructure bill, known as the Infrastructure Investment and Jobs Act, already passed the Senate by a vote of 69-30 on August 10. Many people have asked: “What is the bipartisan infrastructure bill, and what’s in it?” Focusing on the traditional definition of infrastructure, the bill focuses on roads, bridges, rail, and water. It is truly a monumental measure, with an equally monumental 13 digit price tag!

What’s in the bipartisan infrastructure bill?

However, the bipartisan infrastructure bill cannot become law until it also passes the House of Representatives, and that is where things begin to become tricky.

Speaker of the House Nancy Pelosi promised that the House would vote on the $1.2 trillion bipartisan infrastructure bill yesterday, but that vote was again delayed. The problem? Pelosi faces pressure from progressive Democrats, who say they will not support the “skinny” $1.2 trillion bipartisan infrastructure bill unless the much bigger $3.5 trillion infrastructure bill, focusing on human infrastructure and social spending such as climate change mitigation, increased child care funding, and health care expansions, also moves ahead.

We truly feel it is amazing that we live in a world where spending $1.2 trillion on a bipartisan infrastructure bill is considered “skinny,” but it is when compared to the $3.5 trillion infrastructure bill!

Financing such social programs as universal pre-kindergarten, extended childcare, and expansion of health insurance coverage provided under Obamacare, the $3.5 trillion infrastructure bill, known as the American Families Plan (AFP), it represents the largest expansion of federal spending since the New Deal. And, with this enormous price tag comes the concurrent federal income tax increases to fund it. Here are the potential “highlights”:

• Federal income tax increases – the AFP will restore the 39.6% pre-Trump, pre-Tax Cuts and Jobs Act marginal ordinary income tax rate. This current marginal rate is 37%.
• Multimillionaire excise tax – the AFP places a 3% excise tax on income in excess of $5 million
• Higher corporate tax rates – the corporate tax rate is set to increase form 21% to 26.5%, with a new minimum tax of 16.5% on offshore earnings
• Higher capital gains tax rates – the federal marginal capital gains tax rate for those with incomes higher than $400,000 will increase from 20% to 25%, and will be retroactive to September 13, 2021

And the less-likely but still possible proposals:

• Elimination of the step-up in cost basis upon death
• Limitations on popular tax planning vehicles such as Section 1031 “like-kind” tax-free exchanges and IDC (intangible drilling cost) deductions

Additionally, the following indirect federal income tax increases are in the crosshairs:

• Elimination of Roth IRA conversions for taxpayers filing jointly with incomes over $450,000, and for single taxpayers with incomes over $400,000
• Elimination of “Backdoor” Roth IRA contributions, banned for ALL income levels
• Mandatory taxable drawdowns of large IRAs – contributions to IRAs that have a total value of $10 million or more would be prohibited, IRAs and 401(k)s in excess of $10 million will have required minimum distributions of half of the amount over $10MM, and for retirement accounts over $20 million, everything over $20MM must be distributed immediately

Federal Income Tax Increases Explained

Still confused? Have more questions? Hungry for clear answers? Found below is a simple educational video we just produced, designed to break down the complicated topic of the $1.2 trillion bipartisan infrastructure bill, the $3.5 trillion infrastructure plan details, and the concurrent federal income tax increases that may occur, all specifically arranged in a digestible and easy-to-understand format.

Click HERE to watch the video!

Be sure to also click the SUBSCRIBE button to follow

Towerpoint Wealth on YouTube!

Importantly, and regardless of how things shake out, at Towerpoint Wealth we sincerely believe three things:

1. Taxes will be higher over the next few years, perhaps as early as January of 2022, and perhaps significantly for higher income earners
2. It is very reasonable to assume that this infrastructure legislation, in one way, shape, or form, will become law, and that trillions of dollars will soon be spent by our Federal government
3. The next three months represent the most important tax planning months in recent years, as potential federal income tax increases mentioned above could be effective as soon as 1/1/2022

These tax planning opportunities include:

• Accelerate income into THIS YEAR, and defer tax deductions into future tax years, to leverage today’s low income tax rates and minimize tomorrow’s potential Federal income tax increases
• Utilize a partial, or even full, Roth IRA conversion in 2021, for the same reason mentioned directly above
• Evaluate gifting strategies, such as the utilization of a donor advised fund (DAF), to accelerate (or “bunch”) your charitable contributions to hurdle the standard deduction in 2021

Have a plan, and if you don’t, we encourage you to click HERE to message us and begin to discuss your circumstances further. With the high probability of federal income tax increases occurring in the near future, time is of the essence!

What’s Happening at TPW?

Our always-photogenic Director of Research and Analytics, Nathan Billigmeier, and his beautiful wife Jessica, post together prior to heading into the brand new Safe Credit Union Performing Arts Center in downtown Sacramento to see a stellar performance of Hamilton!

Most of the Towerpoint Wealth family (and extended family!) had a fun day of golf two Monday’s ago, directly supporting the Rotary Club of Arden-Arcade and the Rotary Club of Granite Bay to raise resources and money for homelessness, at-risk youth, and local schools and parks.

It was quite the “Around the World” golf tournament, specifically the craft beer, jello shots, and marshmallow drive on the TPW-hosted 7th hole!

Graph of the Week

Are you a nocoiner, or do you HODL?

A compelling chart below suggests that cryptocurrency does not appear to be going away any time soon!

What do you think is going to happen with crypto? Click HERE to message us and let us know your thoughts!

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Secret Joe Manchin ‘agreement’ with Chuck Schumer leaves Democrats scrambling
• The US Treasury says that the US and Qatar have issued sanctions against a Hezbollah financing network in the Arabian Peninsula
• Tesla’s “full self-driving” may be says away from sharing the roadways
• The historic Giants/Dodgers 2021 NL West race may be the best of all time
• The Dixie Fire, the largest wildfire in the United States, is now 94% contained
• Joint Chiefs of Staff Chairman General Mark Milley and Defense Secretary Lloyd Austin III testify about US failures in Afghanistan during a Senate Armed Services Committee hearing

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

In the Northern Hemisphere, September (the harvest month) marks the beginning of meteorological autumn, and in many countries, the beginning of the academic year.

In her short poem about the month of September, the Canadian author Lucy Maud Montgomery (best known for her classic children’s novel, Anne of Green Gables) offers a cheerful tribute to the ‘late delight’ of the month:

Lo! a ripe sheaf of many golden days

Gleaned by the year in autumn’s harvest ways

With here and there, blood-tinted as an ember,

Some crimson poppy of a late delight

Atoning in its splendor for the flight

Of summer blooms and joys

This is September

She could be saluting 2021’s cheerfully buoyant year-to-date stock market returns, with the S&P 500 up +20.35% as of Thursday, September 16th.

However, September has historically been a volatile month for stocks, and in the past has ranked as the least promising month of the year, on average, for the S&P 500 index over the 1928-2021 time frame:

Additionally, through September 1st of this year and as depicted by the chart below, the S&P 500 has reached a total of 53 (!) new record closing highs, the fifth highest figure in the past 93 years:

The $64,000 question: Is it reasonable to expect this growth and momentum continue? Here are both sides of the story:

Positive Economic Developments

1. Improving jobs market: After a rolling sequence of shortages in 2021 (including lumber, used cars, ocean shipping capacity, and semiconductors), labor also continues to be in short supply for many companies. This is reflected in the Bureau of Labor Statistics (BLS) report of an increase to 10.1 million job openings (!) as of the last business day in June, the highest EVER figure since job openings began to be tracked in December of 2000.
2. “Goldilocks” labor recovery: While the labor market is improving, it does not appear to be improving at such a rapid extent that the Federal Reserve feels compelled to becomes more aggressive in reducing (or “tapering”) its current level of asset purchases (currently $120 million per month)
3. Services and manufacturing sector expansion: On September 3rd, the Institute for Supply Management (ISM) reported its services index grew for a 15th consecutive month, registering a 61.7 in August after a hitting a record high of 64.1 in July. On September 1, the ISM reported its manufacturing index also grew for 15 consecutive months, with a very good reading of 59.9.
4. Rising home prices: Spurred by extremely low interest rates, an increased ability to work remotely, and low inventories of homes for sale, the median sales price for single-family existing homes was higher year-over-year in 2Q, 2021 for 182 of the 183 metropolitan areas tracked by the National Association of Realtors (NAR). In fact, in 94% of those metropolitan areas, median prices rose by *more than* 10% from a year earlier!
5. Potential for scaled back tax increases: In a September 2 Wall Street Journal op-ed, West Virginia Senator Joe Manchin indicated that he would not support a social infrastructure spending bill anywhere near $3.5 trillion, thus reducing the chances that such a large package would become law and lead to significantly higher taxes
6. Significant individual and institutional investor liquidity: The Investment Company Institute (ICI) reports that as of 9/15, total assets of retail money market funds amounted to $1.43 trillion (!), and total assets of institutional money market funds reached $3.03 trillion. This almost $4.5 trillion of CASH currently sitting on the sidelines represents significant buying power for financial assets
7. Significant corporate liquidity: According to Dow Jones Market Data, cash holdings among S&P 500 companies reached $1.98 trillion on August 9, a more than 30% increase from two years ago at the end of 3Q, 2019 When combined with significant available credit that remains unused, S&P estimates a total of $6.8 trillion of unused cash liquidity is available to the corporate sector as a whole. This liquidity can be used to buy back stock, increase dividends, and pursue strategic capital investments

Please bear in mind, while this is an impressive and robust list, there are also risks and concerns to worry about: Uninspiring retail sales, weakening commodity prices, slower 3rd quarter GDP growth estimates, and declining consumer confidence, to name a few.

However, at Towerpoint Wealth, we believe the most concerning potential headwind comes in the form of high stock valuations, as the S&P 500’s forward price-earnings (P/E) ratio of 21.2x is the highest it has been in two decades!

Although stretched valuations generally do not represent a causal trigger for a stock market correction, at elevated levels (as is presently), they nevertheless can serve investors well as a cautionary warning sign.

While we will always remain humble about our ability to consistently predict the future with accuracy, we do advise clients and friends to heed these high valuations, and to be vigilant in biasing high-quality, “all-weather” assets in their portfolios, especially in light of complacent stock market volatility readings and the long span of time without so much as a 5% market correction.

Confused? Worried? In need of discipline, direction, and/or a plan? Have questions or concerns? Click HERE to contact us for an objective, no-strings-attached conversation about you and your circumstances, as we fully support and echo Warren Buffet’s philosophy:

What’s Happening at TPW?

Our Partner, Wealth Advisor, Jonathan LaTurner, wrapped up an amazing trip to Washington D.C. with his fiancée, Katie McDonald, stopping by 1600 Pennsylvania Avenue and also the Smithsonian’s National Museum of Natural History.

Looks like an awesome tour of our nation’s capital, Jon!

The San Francisco Giants are hot right now (!), and our Director of Tax and Financial Planning, Steve Pitchford, and his partner, Katie, took in an AMAZING extra-innings Giants ‘W’ versus the Dodgers two Fridays ago at Oracle Park! #BeatLA

Illustrations/Graphs of the Week

You cannot keep funds in a retirement account indefinitely, as the government wants their share! Required minimum distributions (RMDs) represent the minimum amount that you must withdraw from your IRA or employer-sponsored retirement plan account each year. With the exception of Roth IRAs and Roth 401(k)s, from which withdrawals occur tax-free and are not required until after the death of the owner, regular RMDs can be a “tax thorn” in the side of many investors who have accumulated wealth in any tax-deferred retirement account.

In addition to the two resources found in the news stories at the bottom of this newsletter (discussing RMDs and QCDs), the table directly below, courtesy of Michael Kitces from Kitces.com, does an excellent job of outlining the various strategies available to reduce, minimize, and delay these pesky mandatory, and taxable, retirement account withdrawals:

Confused? Have questions or concerns? Click HERE to contact us for an objective, no-strings-attached conversation about you and your retirement account circumstances.

Trending Today

As the 24/7 news cycle churns, twists, and turns, there have been a number of trending and notable events that have occurred over the past few weeks:

• Confused by the debate over President Biden’s controversial COVID-19 vaccine booster plan? Click this helpful FactCheck.org explainer.
• Japan condemns North Korea’s ballistic missile launch as “outrageous” and a “threat to the region.“
• President Biden expresses confidence in the chairman of the Joint Chiefs of Staff, General Mark Milley, after calls for his resignation amid revelations that Milley twice called his Chinese counterpart to assure him the US was not going to attack China
• The US and Britain announce a defense deal with Australia, helping the country deploy nuclear-powered submarines to counter China’s influence in the Pacific
• Fires are still burning in Northern California, and Sequoia National Park’s giant trees are at risk
• The Zohra Orchestra, made up entirely of female musicians, has not been able to escape the Taliban’s hostility in Afghanistan
• Police are eager to question fiancée of missing ‘van life’ woman, Gabrielle Petito

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

Big Oil. A somewhat-pejorative name used to describe the world’s six largest publicly traded oil and gas companies:

BP, Chevron, ExxonMobil, Royal Dutch Shell, TotalEnergies, and ConocoPhillips.

These “supermajors” are facing intense challenges, specifically to their oil reserves and production. Pressure to cut back traditional upstream spending and redirect capital into renewable energy projects is intense, which we believe will drive oil supply down and oil prices higher.

Oil production growth outside of OPEC+ has been extremely difficult to achieve, and recent ESG pressures have exacerbated these problems. In what the New York Times dubbed a “stunning defeat” for ExxonMobil, and a huge win for ESG proponents, activist investor Engine No. 1 secured three new directors (out of 12 total) to ExxonMobil’s board of directors, with a specific mandate to reduce the company’s carbon footprint by curtailing capital investments into its upstream oil and gas businesses. At about the same time, a Dutch court ruled that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align company policy with the Paris Climate Accord.

What will happen when the other supermajors are also forced comply with mounting ESG and governmental pressures and reduce upstream spending? We believe non-OPEC production will continue to decline, further paving the way towards increased capital expenditures for renewable energy projects. A Rystad Energy analysis forecasts renewable energy projects to set a new record in 2021 ($243 billion), narrowing the gap with oil and gas spending (projected to be relatively flat at $311 billion).

These facts all align with the multi-step strategy that President Biden announced just earlier this month: By 2030, half of all new vehicles sold in the US should be electric. And while this goal is a bit loftier than the EV sales projections found below, the transition from oil to electric is obviously no longer a trend, but instead a full-blown movement.

Underscoring this movement was the pledge made by executives from the three largest US auto companies: 40 to 50% of their new car sales would be electric by the end of the decade. Understanding that gas-powered vehicles are the single biggest source of greenhouse gases in the US (producing more than 25% of our total emissions), a rapid shift from combustion engines to EVs continues to aggressively take place. Need further confirmation?

• GM announced in January that it will be phasing out all of its petroleum-powered cars by 2035
• Ford introduced an electric version of the best-selling vehicle in the US, the F-150 pickup truck
• Shifting from electric-first to electric-only, Mercedes Benz is ready to go all-electric at the end of the decade

The question certainly remains: Will consumers buy them?

At Towerpoint Wealth, we recognize there are obstacles: higher sticker prices, the lack of widespread charging stations (needed for longer-distance drivers), stress to the country’s power grid (if every American drove an EV today, the US could end up using about 25% more electricity than it does today), and pressure from labor unions (EVs have 30-40% fewer moving parts, and require fewer workers to assemble) are all headwinds to this movement. However, we also believe it is just a matter of time before combustion-engine vehicles take their place next to rotary phones, VCRs, and the folding maps.

What’s Happening at TPW?

Three generations of Eschleman men!

Our President, Joseph Eschleman, attended the Philadelphia Phillies / Tampa Bay Rays game on Wednesday evening at Citizens Bank Park in Philly, with his father Eric and his 11-year-old son, Henry.

The Phils blew the game in the ninth inning, but all three Eschlemans had a great time together!

In an effort to maximize our productivity as a firm, we were early to adopt Salesforce as our customer relationship management (CRM) software.

Salesforce forms the backbone of our operations, allowing us to efficiently administer and manage all of our interactions with clients, colleagues, prospects, and friends.

A huge thank you to Ryan O’Connell, Dynasty Financial Partners’ CRM specialist (in the photo, “sandwiched” between Michelle Venezia and Lori Heppner after lunch yesterday) for being on site this week to assist with a Salesforce instance upgrade, helping us to stay ahead of the curve and better interface and communicate with each of our clients!

Illustrations/Graphs of the Week

Have you heard that federal capital gains taxes may soon be increasing?

Although the final details of President Biden’s American Families Plan to potentially increase capital gains taxes (to pay for some portion of the various US Congressional domestic priorities such as education and child care) are not yet specified, they are likely to influence securities prices and financial market conditions.

Oddly, the chart below depicts the price return of the S&P 500 index six months before and six months after capital gains taxes were increased.

By far (and we feel, surprisingly), the six months BEFORE capital gains taxes are increased represent the periods of most risk to equity prices.

Trending Today

As the 24/7 news cycle churns, twists, and turns, there have been a number of trending and notable events that have occurred over the past few weeks:

• Twin bomb attacks by Islamic State terrorists at the Kabul airport killed at least 90 people, including 13 US troops
• In a victory for property owners, the US Supreme Court halted the Biden administration’s pandemic eviction moratorium
• RIP Charlie Watts, the drummer and “heartbeat” of the Rolling Stones, dead at the age of 80
• The U.S. Agency for International Development announces $32 million more in humanitarian aid for Haiti earthquake victims
• 2,900 firefighters are attacking the blaze as gusty winds drive the Caldor Fire to within 14 miles of South Lake Tahoe
• Lieutenant Michael Byrd, the Capitol Police officer who fatally shot Ashli Babbitt during the January 6 storming of the US Capitol, speaks publicly for the first time

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

Have you tried to rent a car lately?

Inflation Chart 2021

Go out to eat?

Inflation Chart This Year

Take an Uber or Lyft?

As our economy continues to open up after massive lockdowns, there is no question we are feeling the effects of inflation.

Now at a 13 year high, the overall measure of CPI for the month of July matched the highest reading of headline CPI since 2008 – an estimated rise of 5.4% over last year!

What does inflation mean? Is inflation good or bad?

How can inflation affect interest rates? All important questions, especially in the current environment of rising prices that we find ourselves in.

Opinion remains divided on whether consumer and producer price inflation rates will be “transitory” or “enduring” in the months ahead, and at Towerpoint Wealth, we believe the jury is still out in terms of arriving at a definitive conclusion. Putting aside our skepticism about the ability of experts to accurately predict the future, a late June, 2021 survey of 52 economists found that 70% estimated the likelihood of inflation exceeding 3% in 2022 to be “somewhat unlikely” or “very unlikely.”

The answers to the questions “What does inflation mean?” and “Is inflation good or bad” can be succinctly summarized like this:

1. Inflation erodes purchasing power, as it represents a decrease in the purchasing power of a currency due to a rise in prices
2. Inflation encourages spending and investing, as people buy and invest now, rather than later
3. Inflation raises the cost of borrowing, as interest rates tend to increase when inflation occurs (good for savers, bad for borrowers)
4. Inflation reduces unemployment, as unemployment falls, employers are forced to pay more for workers, and as wages rise, consumers tend to spend more
5. Inflation increases growth, as consumers and businesses have an incentive to spend and invest today, rather than tomorrow, when prices are assumedly higher

Before the pandemic, inflation had been in a secular decline since the 1970’s:

Clearly 2021 has been different, and at least for the time being, this secular decline is over. Understanding that inflation is an important force that can dictate the performance and stability of an economy, we have our fingers crossed that the “slow and steady” inflationary environment of the past three decades returns, subsequent to our economy continuing to normalize after the roller coaster it has been on since March of last year.

What’s Happening at TPW?

Our Client Service Specialist, Michelle Venezia, moved from crabbing to clubbing while on her Norwegian Cruise Line cruise through Alaskan waters earlier this month, with Ketchikan being the port of call!

You look great in both photos Michelle, glad to see you having so much fun on your vacation!

Alaska has definitely been the theme at Towerpoint Wealth, as our Director of Tax and Financial Planning, Steve Pitchford, went on an epic adventure with his partner, Katie, touring and hiking through Denali National Park and Preserve late last month!

Illustrations/Graphs of the Week

Think long term. Patience pays…

Broken record – think long term – patience pays! How to Build Wealth

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

Imagine you were offered a job, and were counting on it to provide income for you AND your family for many many years. BUT, you didn’t ask about 1.) the starting date, 2.) the salary, nor 3.) the benefits!

Now, change ‘job’ to ‘Social Security’ and you get a sense of the general lack of knowledge many Americans have about this bedrock retirement income stream.

However, why is the very foundation of retirement security for millions of Americans so confusing? When should you take your Social Security benefit? Early at 62? At normal retirement age (NRA)? Delay and take it at 70?

Do you have concerns about the solvency of the Social Security system (hint: as long as workers and employees pay payroll/FICA taxes, it’s not going anywhere), and how that might affect your benefit?

Have you heard of Social Security spousal benefits and survivor benefits, but not sure you understand how they work?

Social Security Explained | Other FAQ’s about Social Security include:

1. What exactly is Social Security?
2. When am I eligible for Social Security?
3. How is my eligibility determined?
4. How much do I pay in to the Social Security system?
5. How much will I get from Social Security?
6. What happens to my Social Security benefit if I still work?
7. Do I owe taxes on my Social Security income?
8. How do I qualify for Social Security disability benefits?
9. What is the average Social Security benefit?
10. What will COVID-19 do to Social Security?

Still confused? Have more questions? Hungry for clear answers? Found below is a simple educational video we just produced, designed to break down the complicated topic of Social Security, specifically arranged in a digestible and easy-to-understand format.

Click HERE to watch the video!

Be sure to also click the SUBSCRIBE button to follow

Towerpoint Wealth on YouTube!

Understanding it is an imperfect system, Social Security continues to be a central and essential component of the retirement income planning and optimization we do with virtually all of our clients at Towerpoint Wealth, with literally hundreds of thousands of dollars at stake depending on how you claim it.

What’s Happening at TPW?

Most of the Towerpoint Wealth team spent some time earlier this week prepping new backpacks full of back-to-school supplies we purchased for low income and homeless students in the greater Sacramento area.

Cheers and thumbs up to Jesuit High School here in Sacramento for coordinating this program, as it is enjoyable to do little things like this to give back and help our local community.

Happy 37th birthday on Wednesday to our smart, YOUNG, fun, sincere, affable, and hard-working Partner, Wealth Advisor, Jonathan LaTurner. Jon’s amazing birthday dinner was held at Canon | East Sac, and his amazing birthday cakes were prepared by Freeport Bakery – mmmmm!

Graphs of the Week

Some say low interest rates, a perennial shortage of housing supply, and the new geographic mobility of would-be homebuyers all mean the white-hot real estate market has more room to run (click HERE to watch an excellent TPW-produced video on this subject).

Others believe the OPPOSITE – that soon-to-be rising interest rates, artificially-high prices, the end of mortgage forbearance and foreclosure moratorium programs, and the divergence between home prices and wages all portend an upcoming end to the massive residential real estate bull market.

What do you think is going to happen to home prices over the next 12 months? Click HERE to message us and let us know your thoughts!

More room to run for home prices?

or the end of the road for price increases?

Trending Today

As the 24/7 news cycle churns, twists, and turns, there have been a number of trending and notable events have occurred over the past few weeks:

• Indoor masking is back – Sacramento County returns to indoor mask mandate, cites ‘drastic’ rise in COVID-19 cases
• Wildfire season is here in California and other western states. The smoke traveled across the entire country, carried by wind currents
• The conservatorship battle between Britney Spears and her father, James Spears, continues
• The United States leads all countries in medals (41, as of 7:00AM PST) as the 2020 Tokyo Summer Olympics continues
• The 2021 NBA draft took place last night, IN PERSON, at the Barclay’s Center in Brooklyn – here are the winners, losers, and surprises, at least according to ESPN
• An 8.2-magnitude earthquake erupted between the Alaska Peninsula and the Aleutian Trench on Wednesday, the strongest US quake in 50 years
• A C.D.C. internal report calls the Delta variant as contagious as chickenpox

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

Here we go! “How much do I need to retire? How much in retirement savings should I have?” – two questions virtually all of us have asked ourselves as our non-working, non-earning years draw closer.

If (or perhaps we should say WHEN) the Secure Act 2.0 becomes law, many pre-retirees will have a myriad of additional new options and opportunities to save and invest for retirement, and to build and protect their net worth. And while there is no such thing as a “sure thing” in Washington D.C., the Securing a Strong Retirement Act of 2021 has bipartisan support, and was approved unanimously by the House Ways and Means Committee just over two months ago.

What is changing, and what kind of new net worth building and retirement saving options and opportunities will be available? Click the link below to watch an engaging six-minute educational video that we just recently published, featuring our President, Joseph Eschleman, *jam-packed* with information highlighting six MAJOR ways your retirement savings plan may change (for the better!) if the Secure Act 2.0 becomes law:

Click HERE to watch Joe’s video.

Be sure to also click the SUBSCRIBE button to follow

Towerpoint Wealth on YouTube!

“How much savings do I need for retirement?” is a question we look forward to helping clients, colleagues, and friends (i.e., YOU) succinctly and tangibly answer. We specialize in retirement income planning, and – understanding how unique everyone’s personal and financial circumstances are – we encourage you to click HERE to contact us and begin a no-strings-attached dialogue about how to answer this important question for yourself.

Shifting gears, the June 23 cryptocurrency/Bitcoin webinar we hosted along with our partners at Eaglebrook Advisors was extremely well-received. Please click on the story tile below to read Eaglebrook’s latest white paper, Bitcoin’s Role in Model Portfolios, and if you missed our 6/23 webinar…Click HERE to watch the replay!

Be sure to also click the SUBSCRIBE button to follow

Towerpoint Wealth on YouTube!

What’s Happening at TPW?

Our President, Joseph Eschleman, and Director of Tax and Financial Planning, Steve Pitchford, couldn’t be happier being vaccinated and getting back out to spend IN PERSON face-to-face time with a number of important Towerpoint Wealth clients and colleagues!

Joseph and Steve Shaffer in downtown Davis, CA

 Joseph, Dorace Lynch, and Johnny Lynch in Vacaville, CA

Joseph, Nancy Kendall, Bill Kendall, and Steve in Elk Grove, CA

Cartoon of the Week

As the cartoon below illustrates, inflation is not always immediately visible, and not always “feelable” (although if you have purchased a tank of gas, a new home, or a new or used car lately, your wallet has certainly felt it!) and its insidious nature can be quite problematic when investing to grow your net worth. Trying to answer the question “How much do I need to retire?” cannot be done without considering the impact that inflation will have on the cost of your future retirement lifestyle.

At Towerpoint Wealth, we feel that avoiding risk when investing (i.e. prioritizing that your nest egg and retirement funds do not fluctuate up and down in value) by focusing on owning CDs, money market funds, and cash “safely” in the bank, is akin to letting inflation peck away and erode your net worth. We believe that “risk,” in and of itself, is not a bad thing – it is one of the few variables we have direct controlover. The binary question of “if” risk should be taken is inappropriate in our opinion – instead, we believe that evaluating, measuring, and justifying exactly howmuch and/or what level of risk should be taken is the more important consideration.

Highlighted by the deterioration in value (in REAL dollars) that “safe” investments can and oftentimes do experience due to inflation (and income taxes), it is important to understand that both “safety” and “risk” are relative terms, and to think critically about both concepts when developing, implementing, and managing a customized financial, investment, and retirement plan and strategy.

Trending Today

In addition to new legislation and inflation gyration, a number of trending and notable events have occurred over the past few weeks:

• Earthquakes rattle Northern California yesterday, “highlighted” by a magnitude 5.9 earthquake near Markleeville, in Alpine County
• Bill Cosby was released from prison after his sexual assault conviction was overturned by the Pennsylvania Supreme Court
• COVID-19 vaccinations have ground to a virtual halt in some areas of the United States
• A bi-partisan infrastructure deal is set to reach the Senate floor as early as the week of July 19
• A record-smashing heat wave baked the Pacific Northwest last week
• Spectators have been barred from Tokyo Olympics venues amid Japan’s COVID-19 state of emergency
• The Biden administration is launching a door-to-door effort to vaccinate Americans, causing backlash

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle