The third quarter proved an eventful one for investors. Interest rates ticked higher, the Delta variant reminded us that COVID-19 is still very much with us, and the supply chain disruptions of 2020 started coming home to roost. The confluence of events, and some profit taking given the strong first-half gains, contributed to September’s 4.8% and 4.1% declines for the S&P 500 and All-World equity indices. September’s losses wiped out the gains for the quarter, but considering the major equity indices are still up 14.8% and 11.6% thus far in 2021, it is tough to complain.
When it comes to retiree health insurance, it can be overwhelming to understand when to enroll, options under each plan, costs and what plan best fits your needs. In this brief commentary, we highlight things to consider as you approach retirement.
Our April Market Commentary was titled, The Opposite of Cabin Fever. In short, we expected social and business activity to resume abruptly as vaccines were distributed and the threat of the COVID-19 crisis receded. The caption seemed somewhat bold at the time. Admittedly, we were rather proud of it. In hindsight, we still underestimated the pace at which activity would resume. Pent-up demand for goods and services, the desire to get out of the house (though not necessarily back to the office), and record levels of cash on personal and business balance sheets have combined to fuel the highest level of U.S. economic growth since the early 1980s.
“Let the good times roll, let the good times roll. I don't care if you're young or old. Get together, let the good times roll. Don't sit there mumblin', talkin' trash. If you wanna have a ball. You gotta go out and spend some cash, and. Let the good times roll, let the good times roll.” - B.B King
At the same time, once in a generation demographic, cultural, and secular business shifts are unfolding before our eyes. Higher wages, coupled with improved household balance sheets, have meant workers are quitting or retiring at a record pace. Technology continues to change the way we work, shop, and coming this fall, support our favorite college football players/teams. Moreover, when measured in trillions of dollars, the range of policy proposals on the table in Congress are as wide as we have ever seen.
"If you're feeling good, don't worry. You'll get over it." - Yogi Berra
Judging from increased pedestrian traffic and the return of pedal taverns and party barges, signs of life in downtown Nashville are emerging. While certainly tepid relative to recent years, and despite the enormous challenges still facing the major arts and entertainment venues, the activity is encouraging. More broadly speaking, business and social activities around the country are returning at a rapid pace. As the chart below reflects, spending by Millennials and Gen Z is already ahead of pre-pandemic levels.
“Spring is nature’s way of saying, “Let’s party!” – Robin Williams
Unprecedented financial liquidity and government stimuli, a desire to catch up on life, and some sunny spring weather are proving a potent combination. With increasing supplies and availability of vaccines, we remain hopeful emerging coronavirus variants won’t send everyone back to the cabin.
Solo 401(k) vs SEP-IRA
As a small business owner, reviewing the array of retirement accounts at your disposal can be daunting. In this brief, we seek to help business owners sort through these options and identify some opportunities you can discuss with your CPA.
While there are several retirement savings vehicles available to sole proprietors and contractors, the two favorites in terms of flexibility and savings potential are the SEP-IRA and solo 401(k). SEP-IRA’s were the preferred vehicle of choice up until the passage of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. The EGTRRA broadly expanded the features available within a 401(k) plan to the self-employed, offering the same advantages of a conventional 401(k) plan without being subject to the complex ERISA rules intended to protect non-owner employees. As solo 401(k) plans have gained popularity in the past several years, costs and complexity of establishing a plan have been dramatically reduced, making them a robust contender against the more traditional SEP-IRA.