IN CASE YOU MISSED THE WEBINAR!
This past Wednesday Ray, Eric, and Daniel shared their thoughts on the market last year, what to expect in the coming year and information on the SECURE Act 2.0 with major changes to retirement planning. If you missed it or want to view it again, here is the link:
Passcode: ZQTj=c1R
Ray Ferrara, CFP®
Executive Chair
Eric Ebbert, CFP®
CEO
Daniel Mannix, CFA®
Chair of the Investment Committee
STATE OF THE CRYPTO MARKET
During our webinar, we were asked whether the crypto industry is done for now. We have written in the past about our concerns regarding cryptocurrencies as well as the exciting potential of the underlying blockchain technology. As we have witnessed over the past year, cryptocurrencies are high-risk assets and investors must be willing to weather extreme volatility. U.S. stocks (as represented by the S&P 500) were down 18% last year but Bitcoin, which is arguably the most well-known of all cryptocurrencies, was down 65%. While the decline was rare for U.S. stocks, it is nothing new for the cryptocurrency industry. Bitcoin has spent 80% of its history in a drawdown of 20% or more. In fact, Bitcoin has dropped more than 80% four times since 2010.
The main reason behind the extreme volatility is that the underlying, intrinsic value is very difficult to measure and is arguably non-existent. For stocks, there are three fundamental drivers of return: 1) earnings growth, 2) dividend yield, and 3) multiple expansion. Cryptocurrencies do not have the first two drivers, so investors are relying solely on multiple expansion for returns or that someone else is paying more for the same asset. With easy monetary policy gone and excess liquidity drained from financial systems, we would not be willing to wager on such a bet. Traditional assets like stocks and bonds might be too boring, but attractive and consistent returns over the long-term never get old.
IRS AND INTEREST RATE CHANGES
As of January 1st, the interest rates charged by the IRS for overdue taxes will increase to 7% for individuals and 9% for corporations that owe more than $100,000 in back taxes. On the refund side (you don’t get anything for 45 days after filing a return), a corporation gets 6% on the first $10,000 and 4.5% on the excess. Individuals, however, are paid at a 7% rate
TAX DAY DELAYED UNTIL APRIL 18TH
It is only 90 days until April 15th when taxes are normally due. You should start receiving tax documents such as your W-2s and 1099s beginning in early February. By the time you get everything, there might only be 60 days left. But wait! The 15th falls on a Saturday, so federal taxes will be due on Monday, the 17th. But wait! The 17th is Emancipation Day, which is celebrated in the District of Columbia, so taxes are not due until Tuesday, April 18th. Of course, if you file an extension, you will have to pay your taxes by that date, but the return will not be required until October 15th.
CALIFORNIA’S NEW PINK TAX LAW
On January 1st, California joined the state of New York in making it illegal to charge a “pink tax” – the practice of marking up prices for goods and services marketed to women where men pay less for substantially similar goods/services. What are some examples? Apparel, haircuts, dry cleaning, and personal care products like razors, deodorants, and lotions.
The California Legislature’s Informational Hearing stated that the “typical California woman pays about $2,381 more for the same goods and services than her male counterpart…or approximately $188,000 throughout her lifetime.”i So, the magic question “Will this law save California women $47 billion annually?”
The California law imposes several penalties. A court may issue an injunction or impose civil penalties of $10,000 for an initial violation (with a $100,000 limit). Additionally, a Forbes article points out that enforcement of the law may prove challenging with retailers and manufacturers of women’s products arguing “that it would be difficult to enforce and result in unnecessary lawsuits.”ii
Do you have a pink tax story?
Photo source: Forbes online 12/19/2022 article
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iiElsesser, Kim, “Will California’s New Pink Tax Law Save Women $47 Billion Annually?” Forbes 12/19/2022, https://www.forbes.com/sites/kimelsesser/2022/12/19/will-californias-new-pink-tax-law-save-women-47-billion-annually/?sh=44bb79faff70
WRITE OFF THAT HOME OFFICE?
With more people working from home full-time, the question arises about being able to declare a specific part of the home (owner or renter) as a home office.
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- First, the deduction is available for those that are independent contractors or self-employed.
- The room must be used full-time and 100% dedicated to work. It can’t also act as a spare bedroom, etc.
- You can take actual expenses on a prorated basis including depreciation if you own the home or a part of the rent. If you take depreciation, then you will have to recapture it when you sell your home just as you would for any real estate.
Now, for the bad news…employees cannot declare a home office plain and simple. Ouch!
BEST PLACES TO RETIRE OUTSIDE OF THE U.S.
International Living recently published its 2023 Annual Global Retirement Index which purports to find the best places to live outside of the U.S. in retirement. Seven categories were used in the ranking: housing, visa/benefits, cost of living, monthly budget, development/governance, climate, and healthcare.
Here are the top ten:
9) Thailand and Italy (tie)
8) France
7) Greece
6) Spain
5) Costa Rica
4) Ecuador
3) Panama
2) Mexico
1) Portugal
A few surprises from our standpoint.
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