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The SECURE Act 2.0, which was signed into law on December 29, 2022, is intended to make retirement planning easier and more secure. This is great news because Americans are chronically behind in saving for retirement.

On average, Americans have around $141,542 saved up for retirement, according to the “How America Saves 2022” report compiled by Vanguard, an investment firm that represents more than 30 million investors. However, most people likely have much less. The median 401(k) balance is just $35,345.

The SECURE 2.0 Act attempts to accomplish three goals: Get people to save more for retirement, improve retirement rules and lower employer’ costs of setting up a retirement plan. Some provisions went into effect starting January 1, 2023, while others will go into effect in 2024, 2025 and even later.

How the SECURE Act 2.0 Boosts Retirement Saving

The SECURE Act 2.0 (Securing a Strong Retirement Act of 2022), is an expansion of the SECURE Act, which was signed into law in 2019. The acronym SECURE stands for “Setting Every Community Up for Retirement Enhancement.” The newer bill expands on the original legislation, with new provisions and more opportunities for individuals and employers to save for retirement. This new law aims to make it easier for individuals and employers to save for retirement, and it will provide more secure retirement options.

Most of the changes under the new rules will be phased in over the next few years; they do not take effect right away.

Here are just some of the many ways this legislation will make it easier to save money for retirement:

• Increases the amount that individuals can save in their retirement plans
• [LM1] Enables part-time employees to contribute to 401(k) plans to save for retirement
• Provides tax credits for small employers who offer retirement plans
• Raises the age for required minimum IRA distributions to 73 for 2023 and eventually to age 75
• Allows employers to make 401(k) matching contributions based on employees’ student loan payments
• Allows employees to open emergency savings accounts inside their 401(k) plans
• Enables people to make tax-free and penalty-free rollovers from 529 college savings plans to Roth IRAs, subject to certain limitations
• Allows SEP and Simple IRAs to accept Roth contributions, which are made with after-tax dollars
• Requires automatic enrollment in 401(k) and 403(b) plans.Now, any employer that starts a new plan must automatically enroll newly hired workers, when eligible, and start their contributions at 3 percent of their pay. They can opt out of making these contributions, but they no longer have to opt in. This will help increase the number of people who participate in these retirement savings plans through employers.

Be Aware of Provisions That Might Not Benefit You

As with many situations in life, there are some potential downsides to the SECURE Act 2.0 It is important for you to work with your team of fiduciary advisors to be aware of all the provisions of this legislation so you can avoid potential pitfalls.

For example, in the past, beneficiaries of individual retirement accounts (IRAs) could take distributions from the deceased’s plan over the course of their lives, but now, the new rules state that most non-spousal recipients must take all their distributions within ten years. That could create a real challenge, especially if the beneficiary is employed and those distributions bump him up into a higher tax bracket.

As Always, We Are Here for You!

The SECURE Act 2.0 contains 92 new provisions to promote savings, boost incentives for businesses and offer more flexibility to those saving for retirement.

We are here to guide you through the new rules and to ensure we leverage them to benefit you. Please work with your team of advisors to learn which of the provisions of the new SECURE Act could impact your situation, and how.

We develop comprehensive plans that allow our clients to enjoy their lives today while saving for the future. We can review your current retirement plan and investments for you without cost or obligation. It is never too early or too late to plan for your future. We have helped thousands of people enhance and maintain their lifestyles while simplifying their lives — and we look forward to helping you. Reach out to us any time we can be of service to you, your family or your friends.

 

• [LM1] Employers already offer matching contributions to employees.

Randy Carver, CRPC®, CDFA®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Carver Financial Services, Inc. was established in 1990 with the vision of making people’s lives better — clients, team and community. With this mission, Carver Financial Services has grown to be one of the largest independent financial services offices in the country, managing $2.2 billion in assets for clients globally, as of December 2022. Randy and his team work with individuals who are in financial transition as a result of divorce, retirement or the sale of a business. You may reach Randy directly at randy.carver@raymondjames.com in the office at (440) 974-0808.

The information contained in this post does not purport to be a complete description of the securities, markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large capitalization domestic stocks representing all major industries. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. The hypothetical performance calculations are shown gross of fees. If fees were included, returns would be lower. Hypothetical performance returns reflect the reinvestment of all dividends. The hypothetical performance results have certain inherent limitations. Unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees and other costs.

Also, because the trades have not actually been executed, the results may have under- or overcompensated for the impact of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Returns will fluctuate and an investment upon redemption may be worth more or less than its original value. Past performance is not indicative of future returns. An individual cannot invest directly in an index.

 

 

You may have heard of “the January Effect.” It refers to the belief that stock prices tend to rise more in January than in any other month.

Some traders believe the January Effect is a reliable “calendar effect” that can enable them to purchase stocks at a low price and then sell them after the January Effect has taken place and prices have increased.

How the Theory Came to Be

Investment broker Sidney Wachtel first noticed the “January Effect” in 1942. As he analyzed market returns dating back to 1925, he saw that stocks tended to see greater gains in January than in other months. Later on, a variety of academics confirmed this trend. This pattern has been observed in various stock markets around the world, including the United States.

There are many theories about why the January Effect occurs. Here are just four of many:

1. Some believe the January Effect is the result of smaller stocks outperforming larger stocks at the start of the year.
2. Another theory is that the rebalancing of portfolios and tax-loss selling at the end of the previous year can lead to increased demand for stocks when people rebuy in January.
3. A third theory is that some investors may be more optimistic about the market at the beginning of the year, which could contribute to the increase in stock prices.
4. Still another belief is that the January Effect is caused by people getting year-end bonuses and investing them in the market, or by end-of-year contributions to employee pensions and 401(k) plans.

Is It Fact or Fiction…Or Some of Both?

It appears that there have been some confirmed cases of the January Effect actually taking place. However, there is no clear consensus that the January Effect is a reliable hypothesis, and it certainly isn’t true on a consistent basis. Some studies have confirmed it has been documented primarily in the small-cap world, but the same studies found that the effect has decreased in magnitude over time. In January 2022, The Wall Street Journal reported that this theory applies to bonds more than to stocks.

Analysts at Investopedia ran some numbers to find out if there is any credence to the January Effect. They found that since the start of the 2009 market rally through January 2022, January months showed eight winners vs. six losers, a split of 57 percent to 43 percent. Given the strong rally from 2009, we might expect a higher number of January winners, but that is not the case.

You’ve probably heard the saying, “If it’s so easy, everyone would be doing it.” We believe that’s the case here. If, in fact, if there are always strong returns in January, then why isn’t everyone taking advantage of this phenomenon?

As with many “arbitrage opportunities,” the devil is in the details. (Arbitrage simply means taking advantage of price differences across markets — buying a cheaper version and then selling it at a higher price to make money.) Even when the January Effect does appear, it does not produce additional returns when accounting for risk. The same is true for other calendar-based trading strategies.

To put it simply, most anomalies, especially those based on relatively simple trading strategies, have been exploited over time. While the market is not perfectly efficient, given the evolution of digital and low-cost trading, abnormalities are easily arbitraged away — or never really existed in the first place. This has been increasingly the case for the January Effect.

In our view, the January Effect is mostly fiction, with an occasional instance of truth — just enough to make people believe it’s a given!

Focus Instead on Your Family and Your Personal Goals

As always, and as we’ve maintained over the past 30 years, we do not believe markets can be timed — especially with very short-term trading strategies. There’s a lack of evidence, especially modern evidence, to suggest that retail investors can benefit from short-term trading around the January Effect or any other time.

We believe this time of year is better spent on many other, more important aspects of life, including spending time with friends and family, rather than looking at your portfolio. If you insist on looking at your portfolio, we encourage you to focus on the long term and to judge your success by your ability to do what you want today and in the future.

Regardless of what happens in any given month, there’s plenty of evidence to suggest that buying and holding great companies over the long term is one of the most effective ways to achieve your financial goals. We are here to review and update your planning and portfolio, adjust your asset allocation, minimize tax implications and take advantage of market volatility for you.

As always, we are here for you…

________

Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Randy has more than 32 years of experience in the financial services business. Carver Financial Services, Inc,. was established in 1990 and is one of the largest independent financial services offices in the country, managing $2.2 billion in assets for clients globally, as of December 2021. Randy and his team work with individuals who are in financial transition as a result of divorce, retirement or the sale of a business. You may reach Randy at randy.carver@raymondjames.com.

The information contained in this post does not purport to be a complete description of the securities, markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large capitalization domestic stocks representing all major industries. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. The hypothetical performance calculations are shown gross of fees. If fees were included, returns would be lower. Hypothetical performance returns reflect the reinvestment of all dividends. The hypothetical performance results have certain inherent limitations. Unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees and other costs.

Also, because the trades have not actually been executed, the results may have under- or overcompensated for the impact of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Returns will fluctuate and an investment upon redemption may be worth more or less than its original value. Past performance is not indicative of future returns. An individual cannot invest directly in an index.