Consumer Inflation Hits A Three-Year High
It’s no secret that gas prices have soared since the start of the Middle East conflict. With ships unable to deliver crude oil through the Strait of Hormuz, energy costs have climbed substantially across the world. As a result, May’s CPI report came in mostly in line with expectations, but it was not exactly a comforting report. Month-over-month inflation increases were lower than in April, but year-over-year numbers moved higher. Headline CPI rose 0.5% for the month and 4.2% year-over-year, marking the highest headline inflation rate since April 2023. Core CPI (excludes food and energy), rose 0.2% for the month and 2.9% year-over-year. The good news? The inflationary impact from the conflict is mostly contained in energy-related prices, rising 3.9% in May and accounting for more than 60% of the month-over-month increase in headline inflation. Food prices rose 0.2%, while shelter costs increased 0.3%, down from 0.6% in April.
Looking under the hood, there were some mixed signals. Core goods prices declined 0.1% for the month, suggesting that goods providers do not yet appear to be passing higher fuel costs onto shelf prices. Core services prices rose 0.3%, but that was a slowdown from April’s 0.5% increase, partly due to lower car insurance prices and a normalization in rent inflation. Airfare remained a notable pressure point, rising strongly for the third straight month and now up 26.7% since May 2025 primarily because of fuel costs.
For investors, the key takeaway is that inflation may remain cyclically higher, which could put upward pressure on longer-term interest rates and lead to a steeper yield curve. Of course, the wild card is Iran. Ultimately, the trajectory of the Middle East conflict remains a key factor for inflation, along with whether the impact of higher fuel costs will spread into other goods and services. If there is a resolution between the U.S. and Iran, prices for energy will come down, but it will take time for that to filter through the economy.
Health Savings Account Contributions and the Estate Problem
The IRS has already determined the inflation adjustment for a Health Savings Account (HSA) in 2027. The contribution limit goes up next year by $100 to $4,500 for an individual with a high-deductible health plan and the family contribution limit goes up $250 to $9,000. For those ages 55 and above, they can make a catch-up contribution of $1,000. HSA plans accumulate tax-free if withdrawals are used for qualified medical expenses including deductibles, copayments, coinsurance, prescription drugs, dental and vision care. Contributions are tax deductible. After age 65, withdrawals for non-medical purposes are allowed but subject to income tax. HSA funds rollover year-to-year and can accumulate for future medical or retirement expenses.
There is a “however” at the death of HSA owner. If the beneficiary is the deceased account holder’s spouse, the HSA automatically becomes the spouse’s account. This offers the spouse a tremendous tax advantage because the transfer is not taxable and the spouse may use the funds tax-free for qualified medical expenses. The spouse must report the transfer on their tax return using IRS form 8889, but no immediate tax is incurred.
However, if the beneficiary is not the spouse, the tax benefits disappear. The HSA ceases to be an HSA account upon the holder’s death. The entire fair market value of the account as of the date of death becomes taxable income to the beneficiary. The beneficiary can offset some of this tax liability by using the funds to pay for the deceased owner’s qualified medical expenses incurred within one year of the account holder’s death. The non-spouse beneficiary must also report the inherited amount on their tax return using IRS form 8889.
IRS and Interest Rates
It is the middle of June and that means another quarterly payment to the IRS is due. For those that don’t pay on time, the IRS assesses you interest on the underpayment. If the IRS owes you money, then they pay interest to you. The rates are changing for the 3rd quarter. On those overdue taxes, the IRS will charge corporations 9% if the corporation owes more than $100,000 and individuals will pay 7%. If the IRS owes you money, they will pay 7% for individual taxpayers and 6% for corporations but only for the first $10,000. Everything over that is paid at 4.5%. Seems a little lopsided to us.
Congratulations to Joe McFadden on Earning the CFP® Certification 
ProVise Management Group proudly announces that Joe McFadden has earned the Certified Financial Planner™ (CFP®) certification. This significant professional achievement reflects Joe’s dedication to providing clients with comprehensive, high-quality financial guidance.
Joe began his career researching investments, constructing portfolios, and developing investment strategies. As his experience grew, he came to appreciate that long-term financial success requires more than investment performance alone. Helping clients achieve their goals involves thoughtful coordination of investments, tax planning, retirement planning, estate planning, and other important financial decisions.
Joe is also a Chartered Financial Analyst® (CFA®) charter holder, a distinction widely recognized for its rigorous focus on investment analysis, portfolio management, and ethical standards. Together, these credentials reflect Joe’s commitment to delivering both investment expertise and holistic financial planning to the individuals and families he serves.
Social Security Trust Fund Update
Last week the Social Security Board of Trustees released its annual report regarding the financial integrity of the program. The good news is that the year the trust runs out of money remains unchanged from last year. The bad news remains that the trust will run out of funds in 2032, only six years from now.
The system cannot go totally empty because workers will still pay into the system. but insufficient to pay everyone. In short, benefits will likely be cut by about 20-25%. That means Congress and the White House will have to work together to address the shortfall. We see it as a major issue for the 2028 elections. Older voters are a huge block that shows up at the polls with much more consistency than younger voters.
Double Double Does It Mean Bubble?
We are long-term investors who seek value. In the long run, computer chips and memory will continue to be a good, if not excellent, investment. But when you look at how fast things have happened over the past few months, it is hard to believe that euphoria in chips is something that is setting up for a major downturn based on valuations. On April 2nd a new ETF (DRAM) was launched by Roundhill and since its inception just two and half months ago, it has more than doubled in value. Well, maybe it is safer to say it has doubled in price. It was led by Micron Technology, Samsung, and SK Hynix, which combined are up 74% at the end of May. Now tell us, what makes these three companies worth 74% more in two months? Well, we can’t tell you either given the great volatility in these companies this month, and we expect it to continue.
Now, let’s turn to viewing countries around the world. Everyone is concerned that the U.S. markets are in a bubble because they are up about 30% for the 15 months ending in May. Perhaps they are, but it pales in comparison to others around the world when you look at ETFs representing those countries. To be fair, foreign markets have been downtrodden for almost 15 years going into 2025. However, the rise in the U.S. market placed the United States in just the 35th position from January 1, 2025 through May 2026. Heck, even France is ahead of the U.S. At the top of the list is South Korea, up a whopping 314%, followed by Peru, up almost 120%, Taiwan, up about 107%, and Poland, up close to 105%.
All of this is to say that we would not be surprised to see a market correction in the U.S. and perhaps even a bear market in some parts of the world. After all, markets rarely move in a straight line forever. So why not sell now and wait for a better entry point? The simple answer is that periods of enthusiasm can last much longer than most investors expect, and trying to predict exactly when, where, or for how long, sentiment will shift is extremely difficult. While a correction may occur, history suggests that patient investors who remain focused on their long-term goals are generally rewarded. Even if markets experience a setback along the way, a well-diversified portfolio can still produce attractive returns over time.
Retirement Savings Trends Up
Fidelity Investment just reported the savings results in 401(k) and 403(b) retirement savings plans. Here are a few points from the report: 1) saving rates are at an all-time high with average employee and employer contributions running at 14.4% for 401(k) and 12% for 403(b) accounts; 2) IRA balances are up 7% year over year at $131,380; and 3) 401(k) balances are up 11% to $141,000 and 403(b) accounts average $130,000, up 13% – still pretty low in our opinion.
The Next Generation’s Favorite Retirement Account
New generations are flipping the investing script in meaningful ways. Roth IRAs are now used by over half of Millennial investors (57.9%) and Gen Z investors (55.7%), highlighting a clear shift in retirement savings preference. While 401(k)s remain the dominant retirement savings vehicle, the surge in Roth IRA accounts has been no coincidence. As social media becomes a primary source of information, personal finance content is more accessible than ever. Influencers and “personal finance gurus” frequently promote different strategies, with the Roth IRA emerging as one of the most widely discussed and recommended tools.
There are several reasons commonly cited for this shift. Many younger investors expect to be in a higher tax bracket in the future, making it advantageous to pay taxes now in exchange for tax-free withdrawals later. Roth IRA contributions can also be withdrawn tax- and penalty-free, adding flexibility and even allowing the account to function as a supplemental emergency fund, while earnings may still be subject to taxes and penalties. Additionally, Roth IRAs are not subject to required minimum distributions, which can help manage future tax exposure and IRMAA thresholds. Withdrawals are also excluded from provisional income calculations, which can potentially reduce the taxation of Social Security benefits.
It’s encouraging to see younger generations taking a long-term view and making decisions that position them for future success. While Roth IRAs are not the right fit for every situation, their growing popularity highlights a broader shift toward proactive, tax-aware planning and greater engagement with personal finance.
Sources:
Roth IRAs account for nearly a third of Gen Z and Millennial retirement savings | Empower
Gen Z Can’t Get Enough of Roth IRAs – WSJ
Up Your Assets™
Episode 32: The Child-Free Estate Planning Gap Nobody Talks About 
Did you know that approximately 25% of Adults in the U.S. are child-free, yet little is tailored for those in terms of Estate Planning. In this episode, Ray Ferrara, CFP® interviews Dr. Jay Zygmont, PhD, CFP®, Founder of Childfree Trust® about estate planning for child-free couples, a niche – yet increasingly relevant area. Regardless of if you do or don’t have kids, this population segment will have an impact on you and your community. Estate Planning is not all about DOCUMENTS…it’s so much more: values, pets, charities, and your unique situation. This session provides the answers and valuable insights for advisors and clients alike.
Acknowledgements and Important Disclosures
From the Up Your Assets website
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