TRUMP’S TAX REDUCTION SUNSETS THE END OF NEXT YEAR
In 2017, President Trump, along with a Republican Congress, passed a tax reduction act with portions sunsetting after 2025. The bill reduced personal and corporate taxes, and lowered estate taxes by raising the exemption amount. The Congressional Budget Office (CBO) is the non-partisan office that evaluates the income and costs of programs for the government.
According to a recent CBO analysis, the extension of the Trump tax act will cost $4.6 trillion, with $3.8 trillion coming from decreased personal income taxes. Or, if you wish, we could say it would save taxpayers that much. The original bill reduced taxes by $1.9 trillion. What will Congress do? That depends on how the elections go in November, and without question, it will be a major issue. Trump says he will renew the legislation, while President Biden wants to increase taxes by $5 trillion over the next ten years by raising taxes for those with an income above $400,000 and for those that have a very high net worth.
FTC TURN NON-COMPETES ON THEIR HEAD
In a major change to most businesses, the Federal Trade Commission (FTC) on April 23rd made non-compete clauses null and void. The vote was 3-2, with both Republican members voting against.
They believe that this move will make it easier for employees to work for a competitor but will create jobs (how?), raise wages (probably make it more costly to attract and retain good talent, leading to lower profits), and increase competition. The FTC carved out a narrow exemption for senior executives who have policy making ability and making more than $151,164 (how did they come up with this number?). We will likely see lawsuits filed over this proposal scheduled to become law in August. More to come.
DOL RULES FOR RETIREMENT PLANS
The Department of Labor (DOL) believes that many investors with retirement savings have been taken advantage of by salespeople who did not have to act as a fiduciary when trying to sell “stuff.” According to a recent DOL rule, they must act like a fiduciary by providing conflict-free advice, just as ProVise has done since the late 80s. As a result of this new rule, Morningstar has estimated that retirement plan participants will save $87 billion over the next ten years. That is money in the investors’ pocket, not the salesperson. Does it come as a surprise to you that an insurance industry group has already filed a lawsuit against the new DOL rule? Remember, if a person is not acting as a fiduciary, then we strongly recommend you do not do business with them.
HOW TO IMPROVE WOMEN’S CONFIDENCE FOR RETIREMENT PLANNING? GET A PLAN
As a financial planning firm with the tagline “Financial planning for your life and lifestyle,” we know the importance of having a plan. A recent Goldman Sachs report explored the challenges women face saving for retirement and examined the impact of planning.1
The study found that women with a personalized plan are more confident about their retirement lifestyle than those with no plan. The graph below shows that 35% of women felt “very confident” with a personalized plan versus 11% without a plan. In the next category, 42% of women felt “somewhat confident” in having a personalized plan versus 25% of women without a plan.
Do you need help creating a plan to show you how much is needed to fund your retirement lifestyle and how to invest to achieve your vision? Would a personalized financial plan make you feel financially stable or offer you peace of mind?
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Sources:
1. Retirement Survey & Insights Report “Diving Deeper Into the Financial Vortex” https://www.gsam.com/content/gsam/us/en/institutions/market-insights/gsam-insights/2024/women-retirement-challenges.html
WHAT ARE STOCK BUYBACKS AND WHY DO COMPANIES DO THEM?
As seen in recent news, stock buybacks are all the rage. This practice involves a company repurchasing its own shares from the open market, effectively reducing the total number of outstanding shares. So far this year, 443 companies have announced that they plan to buy back company shares, up more than 15% from last year. Large tech companies like Apple and META are leading the charge after they repurchased shares for $23.5 and $14.53 billion, respectively, in the first quarter. So, the following questions come to mind: why are companies doing this, and how should shareholders react?
A company can boost shareholder value with a buyback. By reducing the number of shares outstanding, the company effectively increases earnings per share (EPS), making each remaining share more valuable to investors. Investors often interpret a buyback as a signal of good financial health and confidence in future cash flow. Buybacks are also more tax-efficient for the company and investors than issuing a dividend, which is typically subject to taxes.
Stock buybacks represent a financial strategy companies employ to manage capital, enhance shareholder value, and signal confidence in their future performance. While they offer several benefits, buybacks are not without controversy. Understanding the motivations behind buyback decisions and their implications for corporate finance is essential for investors.
Sources:
Big Tech Firms Meta, Apple and Nvidia Lead the Stock Buyback Spending Spree – WSJ
HIGHER CONTRIBUTION LIMITS ON HSA PLANS
The IRS released the contribution limits for Health Savings Accounts (HSA) for 2025. Beginning next year, a single individual with a high-deductible health insurance plan can set aside $4,300, an increase of $150, while a family can set aside $8,550, up from $8,300 this year. For those who are 55 and older, they can contribute another $1,000.
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