Nicholas J. Andresen, CFP - Oak Leaf Financial Group

10/11/2024

➡️ Weekend Insight...

As a reader, I prefer reading books rather than listening to audiobooks.

But, to listen to "Born Standing Up" read by Steve Martin himself....

is pure gold.

10/10/2024

Today's Press Release: Social Security benefits will increase 2.5% in 2025. The cost-of-living adjustment will begin January 2025.

Over the last decade the COLA increase has averaged about 2.6%. The COLA was 3.2% in 2024.

This affects nearly 68 million Social Security beneficiaries.

https://www.ssa.gov/news/press/releases/2024/ #2024-10-10

10/04/2024

Home equity accounts for about 45% of American’s net worth according to a study by PEW Research.*

So let’s take a look at what is currently going on and how it affects you.

1. Total Existing Home Sales have been falling since they peaked in 2020 (chart below).^

2. Median Price of Existing Homes has been rising since 2020, however, appears to have leveled out since 2022 when interest rates started spiking (chart below).^

From my conversations with realtors, the biggest reason prices have remained high despite interest rates spiking (causing monthly payments to increase for new buyers) over the last few years is the lack of inventory (e.g. houses for sale on the market).

People have been less willing to sell since Covid (who wants to move during a pandemic) and have continued as homeowners naturally are reluctant to sell their homes if they are locked into a low mortgage rate, especially if it means moving into a new home with a higher mortgage rate (even “downsizing” in this market may mean a similar mortgage payment due to higher interest rates).

What is unknown is how will the market react if interest rates fall.

Also, how will the market react if sellers come back?

Supply/demand economics suggests that prices could be impacted, however, history suggests that prices are fairly sticky when it comes to housing prices (outside of a major event like the mid-2000’s housing crisis) (chart below). #

As for how this affects retirees, this is a challenging market.

A few considerations:

1) Downsizing may still make sense even if interest rates are higher today than your existing mortgage. Remember, you can always refinance (but be aware, refinancing comes with costs). If downsizing to a single level home from multi-level makes it easier for you to get around your house, it may be worth the cost.

2) Being patient for the next 1-2 years to see where interest rates land. The Federal Reserve has stated that they expect interest rates to come down to help keep the economy growing. If there isn’t an urgent need to move, being patient may pay off.

3) At the risk of sounding self-serving, running a few scenarios using sophisticated financial planning software can help clarify your decision and show you in real dollar terms the impact of a decision.

4) If you review the charts above, you’ll notice some historical patterns – if you are selling a home, on average it’s better to sell in June, and buy in December.

If you are interested in running scenarios for your situation, feel free to reach out.

https://go.oncehub.com/NicholasAndresenStrategySession

----

*https://www.pewresearch.org/2023/12/04/the-assets-households-own-and-the-debts-they-carry/?formCode=MG0AV3
https://www.nar.realtor/sites/default/files/2024-09/ehs-08-2024-summary-2024-09-19.pdf
://fred.stlouisfed.org/series/ASPUS

09/26/2024

➡ Final GDP increased at an annual rate of 3.0 percent in the second quarter of 2024 according to the U.S. Bureau of Economic Analysis (news released today).

That’s great news….

…but it’s a few months’ old news.

Perhaps a more valuable indicator is the GDPNow model.

As of Sept 18th, this running estimate that is based on available economic date for the current quarter, is coming in at 2.9%.

Thus, fairly strong and for now the economy is hanging in there.

https://www.atlantafed.org/cqer/research/gdpnow #:~:text=The%20GDPNow%20model%20estimate%20for%20real%20GDP%20growth,17%2C%20up%20from%202.5%20percent%20on%20September%209.

08/22/2024

💡 “You vote with your dollars on the things you care about.”

I heard this today and thought it was a brilliant insight.

In finance, we have budgets. And spending plans. And fly-by-our-pants. All are strategies with some slight variations.

But, if we look at where we actually spend, how does it look?

And are we spending on the things that REALLY matter?

Health…wealth…relationships…life experiences…other???

Do we care about our health? How much are we spending on being healthy?

Do we care about our wealth? How much are we spending on being wealthy?

Do we care about relationships? How much are we spending to have great relationships?

08/14/2024

➡ The consumer price index, a key inflation gauge, rose 2.9% in July from a year ago, the U.S. Department of Labor reported. This is down from 9.1% in mid-2022.

Below are 4 places you can keep your cash that have the potential to beat inflation.

1. High Yield Savings

Pro: High yield savings accounts are paying 4.65% (as of Aug 2024)

Con: If interest rates fall, high yield savings rates are likely to fall as well (we call this reinvestment risk)

2. CDs

Pro: 12-month CDs are paying 4.80% (as of Aug 2024)

Con: If interest rates fall, CD rates are likely to fall as well (we call this reinvestment risk)

3. Bonds

Pro: Diversified bond portfolio (U.S. Aggregate) is yielding 4.40% (as of Aug 2024), but has the potential for an estimated total return upwards of 10.5% if interest rates fall by 1% (as expected by the Fed over the next year)

Con: If interest rates rise by 1%, then bonds have the potential for a total return loss of 2% (current bond risk/return - upside/downside - is appealing in the current environment)

4. Stock Market

Pro: Returns for the U.S. (S&P 500) have annualized at 14.4% over the last 15 years (thru July month-end, according to J.P. Morgan’s Guide to the Markets). Historical returns for U.S. stocks over the very long-term are around 10% annually.

Con: In any given year the stock market could be up 20% or down 20%. Stocks are an important as part of a long-term investment strategy, but short-term needs should be invested more conservatively.

For many, a combination of one or more of these areas is most appropriate.

The consumer price index has risen 2.9% since July 2023, the lowest annual reading since March 2021.

07/30/2024

If you want to retire in a tax-efficient manner, then read this 31-page FREE book....

https://taxesinretirement.greenrope.com/taxes

07/02/2024

➡ Social Security: there are many reasons to delay your Social Security benefits. Here are a few reasons where it may make sense to start them early.

, ,

Check out my "Retirement Tax Strategies and You" eBook. https://taxesinretirement.greenrope.com/RetirementTaxStrategiesForYou In today's video, we're going t...

05/27/2024

Today we remember and honor the brave men and women who gave their lives for this great country. Their sacrifice ensures our freedom and their memory lives in our hearts. God bless.

05/02/2024

Mastering Tax Strategies: How do billionaires like Warren Buffett have the potential to pay a lower average TAX RATE than typical workers (or in Warren’s case, his secretary, as quoted in an interview)?

What is the secret?

Can you take advantage of the same rules?

Is there a 0% Federal tax bracket that you can potentially take advantage of (especially RETIREES)?

The answer may be YES.

Check out my latest video: Mastering Tax Strategies: Capital Gains and Warren Buffett

Today, we're going to cover one of the reasons how billionaires like Warren Buffett have the potential to pay a lower average tax rate than typical workers. ...

04/15/2024

💡 Roth conversions are one of the most powerful tools for retirees to save money on income taxes.

Check out my video as we walk through a case study. https://www.youtube.com/watch?v=m0kvILHsYlc&t=3s

It’s common for us to see people who are in higher tax brackets in their working years fall into lower tax brackets when they retire - for a period of time until income sources like Social Security and required minimum distributions (RMDs) from retirement accounts begin (age 73). This is the “sweet spot” for Roth conversions.

I’ve also had people come to me wanting to do Roth conversions and after running our analysis have determined it would have a negative tax consequence.

Also, you don't have to have a large investment portfolio to make this work, it's about having the right mix of assets combined with your lifestyle spending needs.

My goal of the video is to highlight the situation where it makes the most sense so you can understand if it pertains to you.

Today, we're going to cover what Roth conversions are and show the power they have to potentially save money on income taxes when incorporated into a sound r...

01/09/2024

RETIREES & PRE-RETIREES: Are you trying to reduce your taxes in retirement and keep more of your hard-earned money?

Taxes in retirement can be potentially reduced by taking advantage of a few simple, yet highly effective strategies.

Join me for our next no-charge educational class at the Inver Grove Heights Veterans Community Center on Thursday, January 11th at 10am where I'll share powerful NEW strategies that may reduce the taxes you pay on your retirement income. These are strategies that I use to help people save thousands of dollars that you can begin to implement right away.

You'll learn:
* Tax strategies to implement NOW before the 2025 tax sunset.
* 0% Federal gains rate and how we help people save thousands of dollars in capital gains taxes.
* How Roth conversions can potentially save you thousands of dollars AND protect your children from a major tax trap.
* How to enhance tax savings with tax-loss harvesting and avoid costly mistakes.
* Simple ways to potentially maximize your Social Security benefits and how benefits are taxed.
* 3 retirement income strategies to increase your confidence that your money will last your lifetime.

Don't miss your opportunity to identify strategies that can save you money on taxes. Seating is limited. No products will be offered at this event.

29 people have registered, but there are still a few seats left!

Click to link to see class details and register.
https://taxesinretirement.greenrope.com/TaxesinRetirementClassInverGroveHeights

, , planning,

Taxes in Retirement Seminar in Inver Grove Heights, Minnesota