JB's newsletter to help you set and reach your financial goals

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May 8, 2020

The Recent Rally and Roth Conversions
       The stock market has been on a tare despite devastating economic news.  Just this morning we received news of the worst unemployment report in history - 20.5 million Americans lost their job in April.   The S&P 500 index ended the day +1.69% and +31% from the a low set on March 23rd. 
       The same disconnect between the economy and the stock market happened in 2009 as well.  The unemployment rate remained elevated into 2010 but the S&P 500 bottomed in March of 2009 before rallying +68.7% by year end. 
       The main reason this happens is because the stock market is a forward looking indicator.  I've included a couple of links below for those that are interested in reading more about the recent moves in the market

What i'm more concerned about are managing my clients emotions and expectations so we can stay the course and accomplish their long term goals.  Here are a few general things to keep in mind:
  • Your investment strategy is designed for your future self.
  • The longer the time horizon for your spending needs, the more short term risk and volatility you should anticipate.
  • Short sighted decisions based on emotions of fear and greed can easily wreck havoc on your long term goals if not careful.
  • Declines in the value of your portfolio are unrealized losses, not permanent.
  • The U.S. and global economies are resilient.  The expansions in the U.S. economy last on average more than twice as long as recessionary periods.

Year-To-Date Chart of the S&P 500 Index
Converting a Traditional IRA to a Roth IRA
By Ron Copley, PhD, CFA
       The coronavirus (COVID-19) pandemic has caused the value of most IRAs to decrease in value some rather dramatically. While this is unfortunate, it also presents a unique opportunity: converting a traditional IRA to a Roth. Lower IRA values mean a lower tax on the conversion. The good news is future withdrawals from a Roth are not taxable but they are from a traditional IRA. The bad news is you have to pay a tax on the amount of conversion.
      Contributions to a traditional IRA are tax-deductible at the time of the contribution whereas contributions to a Roth are made with after-tax dollars. Contributions to a Roth IRA are subject to income limits but conversions are not income tested. Anyone of any income level can make a conversion. 
     When deciding whether to convert, you need to consider how you will pay the tax. Paying the tax with cash outside the IRA is the best way. Paying the tax by taking a distribution from your IRA is generally not a good idea.
    Conversion is more feasible the younger you are. The longer you have to recoup the value of the tax paid, the better. Finally, you don’t have to convert your entire traditional IRA--you have great flexibility in deciding how much to convert. Here is a site that can help:
Call me if you wish to discuss this unique opportunity. While I can’t say now is the right time to make a conversion since values may decline even more, but I can say it might be if the circumstances fit your situation. Let’s talk. 
Stay well and be safe.


Happy Mother's Day!

     I want to give a big shout out to my wife, Mehegan, on her 1st Mother's Day.  I continue to be amazed each day by how well she manages to take care of Virginia Parks' every need on top of managing our household, her work as director of operations at GriffinEstep Benefit Group, me and my schedule, and just living an overall fulfilling life as a fun, energized, loving Mom.  We thank you and love you!


     I also want to recognize my Mom who is doing an amazing job as President of the Henderson, NC chamber of commerce.  She's been working around the clock to help local business owners get the resources they need during this pandemic.  The picture below was a special day for both of us : ) 
Justin Burges
Investment Advisor Representative

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