Happy New Year!
As we move into 2026, it is time for reflection. We hardly know where to begin and find ourselves living in the greatest and freest nation in the world. We don’t always agree, but somehow, we seem to come out the other end in a better place than we started.
On behalf of the ProVise family, we thank each of you for entrusting us with your financial planning and investment management needs. We wish everyone a healthy, safe and prosperous New Year!!
Kissing 2025 Goodbye and Ringing in 2026
The end of one year and the beginning of another causes us to ponder last minute tax saving ideas, updating the amount to put into our retirement plans, and reflecting on the past while looking forward to the future. You should also review and make updates to your beneficiary designations in your will, trust, power of attorney, health care surrogate, brokerage accounts, bank accounts, annuities, life insurance, pension, IRA, 401(k), etc.
Life changes things: beneficiaries die, while others are born. Major life transitions like divorce or marriage impact beneficiary designations. Assets at the death of a spouse may pass by joint tenants with rights of survivorship, but the account is now owned by an individual which means it will go through probate if the survivor passes away. Maybe it is time to put the account into a living trust or perhaps have Payable On Death (POD) or Transfer On Death (TOD) added to the account.
First, how long has it been since you updated all your legal documents? Long time, we bet. Take the time early this year to reread those documents to make sure they reflect your intentions. Consider with your attorney whether you should create a living trust if you don’t have one already.
Don’t rely on your memory when it comes to beneficiaries. Confirm your beneficiaries by getting a copy of the beneficiary form because you cannot correct a beneficiary designation after you die.
Welcome to 2026. Let’s Look Back to 1979
As each New Year passes, it is a time to look forward to things to come and to remember the good times of the past. Over the holidays, we had a chance to dig through some old files, which brought back many memories. But then you find some things that make you shake your head in disbelief. Such was a newspaper article from The Houston Post on May 6, 1979. For all you youngsters, here is what was going on in the time before you were born.
It was not a good time, and the events of the day had a lasting impact on the American economy. Paul Volcker was nominated to the Federal Reserve Board as the Chair. America saw inflation increase by 7.7% as we entered 1979, and the dollar dropped 12% over the previous three years. Before Volcker was even confirmed, inflation jumped to 9% and unemployment increased to 6%.
Volcker started to raise interest rates, tightened the money supply, and increased the amount of reserves banks needed to hold. He wanted to break inflation’s back. But killing inflation was not easily done as it rose to 10.9% before the year was over. It was the time of the Iranian Hostage Crisis when they overran the U.S. Embassy in Tehran, oil supplies went down and prices went up, and this led to long lines at the gas pump. The U.S. formally recognized the People’s Republic of China turning away from Taiwan, the Three Mile nuclear fiasco happened, and Carter created the Department of Education. Let’s not forget that technology was front and center with the high-end creation of the “Walkman”.
Yes, it all led to a recession, and it took three long years to tame inflation with the Fed Funds rate reaching about 19% in August 1981 and a 30-year fixed mortgage peaked at 18.45% in October 1981. And we think interest rates are too high today…hey, you missed the fun.
But now back to the article in the Houston Post. Based on information from Citibank, the article reflected on the “typical” American as of 1977 – the most recent data available. The median family income was $16,000, half above and half below. The top 20% had an income over $26,000 and accounted for 42% of total income. Those with a high school education earned $17,110 as a median income while a college education had a median income of $24,852. Those with 8 grades of education earned $9,606. One in ten families had no earned income. 15% of seniors lived below the poverty level, but this was down from 25% in 1969 and 35% in 1959. 50% of the woman in the household worked. Women were already having less children with 43% between ages 20 and 24 without a child compared to only 24% just 17 years earlier. That was the beginning of the aging of America. Almost 2 out of 3 families lived in owner-occupied homes (the American dream). The median price for a house was $51,523. My, oh my, how things have changed over the past almost 50 years. Hope you enjoyed the walk down memory lane.
Invest Act Passes The House
In a rare bipartisan move, the Incentivizing New Venture and Economic Strength Through Capital Formation (Invest Act) passed the House on December 11th with all Republicans and 87 Democrats (301-123) voting in favor. It is now off to the Senate where it is expected to pass and then to the President for his signature. This bipartisan package bundles over 20 individual bills designed to modernize U.S. capital markets, reduce regulatory “red tape,” and expand investment opportunities for both small businesses and individual investors.
Here are few of the key elements:
- Expanding “Accredited Investor” Access: The act modernizes the definition of an accredited investor. It proposes a new certification exam administered by the Securities and Exchange Commission (SEC), likely via Financial Industry Regulatory Authority (FINRA) that would allow individuals to qualify based on financial knowledge rather than just high income or net worth. This would open these capital markets to more investors. It should work well as long as the programs don’t carry too high of a minimum and the fees are not ridiculously high.
- Retirement Plan Parity: A major provision allows 403(b) retirement plans—which serve teachers, healthcare workers, and nonprofit employees—to invest in Collective Investment Trusts (CITs). This provides workers access to the same lower-cost investment options currently available to 401(k) participants.
- Streamlining Public Markets: To encourage more companies to go public, the bill lowers the “Well-Known Seasoned Issuer” (WKSI) threshold from $700 million to $400 million in public float. It also reduces the registration requirement for emerging growth companies from three years of audited financials to two years. It also mandates that the Government Accountability Office review underwriting and IPO fees.
- Protection for Seniors: The act includes the Senior Security Act, which establishes a dedicated task force within the SEC to identify and combat financial scams targeting elderly investors, such as robocalls and voice spoofing.
- Venture Capital & Small Business Support: The bill increases the size and investor limits for qualifying venture capital funds and establishes an Office of Small Business within various SEC divisions to better coordinate capital formation for startups.
We will keep you posted as the Senate is likely to make a few amendments.
A Nibble Here, A Nibble There, But Where Does It Stop?
In the spring of 2025, we said the word of the year would be “uncertainty”, but at the end of the year it is being replaced with the word “affordability.” Given the inflation during 2022 and 2023 and the continuation of it being higher than the Fed’s target of 2%, virtually everyone is complaining about high costs. So much so, that Trump’s promise of “fixing” inflation is now a part of the forgotten distant past as his popularity has declined throughout the year.
So, how are some politicians planning to correct the issue? They want to tax the filthy rich and it is gaining traction in many states. Washington is the most recent to jump on this band wagon by proposing a 9.9% income tax on all income over $1 million. California has proposed a 5% tax on Billionaires’ net worth. Michigan may have a ballot initiative later this year to add a surtax of 5% on incomes over $500,000 for individuals and $1 million for a couple. Zohran Mamdani was elected Mayor of New York City with a promise to raise income taxes by 2% on millionaires. Massachusetts already implemented a 4% surtax on income over $1 million.
Michigan’s population has increased only 0.1% over the past 25 years, but its state budget has increased 15.5% in just the last 5 years according to the state’s own numbers. California’s population has increased by an annual average of 0.22% over the past 25 years, but its budget increased 63% from 2019 to 2025 and is projected to have a $73 billion deficit in the 2026 fiscal year. Setting politics aside, several states appear to be grappling with structural spending challenges. The key economic question is whether proposed tax increases meaningfully improve affordability for everyday households.
Inherited an IRA? Don’t Forget You Are On The Clock!
Being named the beneficiary of a loved one’s retirement account can feel like a gift, but it also comes with some important IRS rules. Knowing these rules can help you avoid surprises and stay on the right side of the tax laws.
The first thing to understand is when you inherited the IRA and who you inherited it from. If you inherited an IRA after 2020 and the person was not your spouse, the IRS generally requires you to empty the account within 10 years. In some cases, you may also need to take yearly withdrawals during those 10 years, especially if the original owner had already started taking required withdrawals, or (RMD’s) before they passed away.
If the deceased was your spouse, the rules are more flexible. Spouses usually have more options, including the ability to delay withdrawals until their spouse would have been 73 or treat the IRA as their own depending on the situation.
For the past few years, the IRS did not strictly enforce the new annual withdrawal rules, which caused confusion for many people. However, the IRS has now finalized the rules and will begin enforcing them going forward, so it’s important to be prepared.
Before deciding how much you need to withdraw, make sure you know:
- Whether the IRA you inherited was from a spouse or a non-spouse.
- Whether the original owner had already started taking required minimum distributions (RMDs).
- Whether you inherited the IRA before or after 2020.
Understanding these three details can help you avoid penalties and make smarter decisions about your inherited IRA.
Do Expense Ratios Matter?
Expense ratios might not grab headlines in the same way as high returns, but did you know they’re an important factor to consider when building a portfolio? An expense ratio is the annual cost of owning a mutual fund or ETF and covers a fund’s management and operational expenses. It’s generally expressed as a percentage of a fund’s net assets and gets automatically deducted from returns. According to YCharts, the average expense ratio for open-ended mutual funds is about 1.2%, while the average for ETFs is roughly 0.6%. While these costs might seem small at first, they can compound over time and gradually become larger as an investment grows.
Because expense ratios are one of the few factors that investors can control, comparing them can help investors make better informed decisions. If a fund has the exact same returns (all else being equal), an investor should generally pick the fund with a lower expense ratio because it allows them to retain more of their investment over time. For example, consider a $100k investment made at the start of 2021 in two ETFs that track the S&P 500 Index – IVV and SPY. IVV has an expense ratio of 0.03% while SPY’s expense ratio is slightly higher at 0.09%. Today, those investments would be worth $199.5k (IVV) and $198.8k (SPY), reflecting a nearly $700 difference in favor of the lower cost ETF.
Generally, index tracking (passively managed) funds have the lowest expense ratios, while actively managed funds – where a portfolio manager attempts to outperform a benchmark index – tend to have higher expense ratios. A higher expense ratio can be justified if an active fund manager has delivered consistent returns above the benchmark, but if not, investors should determine if the higher cost outweighs potential returns. Ultimately, expense ratios should be carefully considered when building a portfolio, as even small differences can have a meaningful impact on returns over time.
Up Your Assets™ Podcast
Episode 24 – 2026 PredictionsI
Ray’s 2026 Predictions Were Better Said: How to Make a Fool of Yourself
In this episode, Ray Ferrara, CFP® shares his predictions for 2026 and reflects on how difficult it is to forecast the future in such an unpredictable world. He looks at several major market themes, including a possible surge in IPO activity with nearly 500 companies potentially going public and raising over 100 billion dollars, helped by the expected passage of the Invest Act. Ray also talks about the growing pressure on private markets, pointing to liquidity issues and rising negative publicity that could reduce investor interest. The conversation wraps up with his outlook on early year economic volatility and how a widening “K economy” may continue to separate people who benefit financially from those who fall behind.
Acknowledgements and Important Disclosures
From the Up Your Assets website
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