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Oaktree Financial Advisors Blog

Here's the Good News About the Stock Market Being Down

Written by Ed Snyder, CFP® on .

on sale website

The stock market was down about 2% yesterday and, believe it or not there was a headline – "The Stock Market is Having its Worst Second Quarter Since the Great Depression". The quarter literally started yesterday. This is the type of negative and doom and gloom type stuff you're going to see. It's no wonder that people get nervous about things.

 

stockmarket small

Put these market slumps in perspective. It's normal and it's expected. It's the price that we pay, as investors in the stock market, for returns that have historically been better than returns that we can get anywhere else. It's just the price of admission if you will. It shouldn't be a surprise that the market goes down. I saw a great Tweet today by Morgan Housel - "About once a year people forget that the market falls 10% about once a year." So true.  

In fact, look at it another way – today is April 3rd. Depending on when you get paid, whether you get paid twice a month, once a month – if you get paid the 15th and 31st or 15th and 1st, your 401(k) contribution probably went in within the last couple days. You're buying shares in your 401(k) that are about 10% cheaper than they were back at the end of January.

So what does that mean in dollars and cents? If you bought a share for $10 a share back then, today it's on sale for $9 a share. That means if you put in $100 back at the end of January, you would have received 10 shares of that investment for $10 a share. Today when that money goes in you're receiving 11 and some fractional shares. So you're receiving at least one extra share for the same amount of money.

It's on sale. Normally, we enjoy sales. For some reason, in the stock market, we get upset about it.

Don't get deterred by the headlines. As we know, these downturns are temporary and they're necessary. We just need to exercise patience and discipline and keep our eye on the long term.

Eli Lilly Employees: Got A Roth 401(k)? You Should Know This

on .

need-to-know-blog

Roth 401(k) withdrawals

Qualified distributions from a Roth 401(k) may be taken tax free. A withdrawal is considered qualified when it is made after the account holder has attained age 59½ and a minimum of five years have elapsed since January 1 of the year of the first contribution to the Roth 401(k) account. Here's the catch. After you retire or otherwise leave your employer, if you rollover your Roth 401(k) to a Roth IRA the time during which the assets were in the Roth 401(k) does not count toward the Roth IRA’s five year holding period.

Why you need a Roth IRA

The five-year holding period is never carried over to an individual Roth IRA upon rollover from a Roth 401(k). The Roth 401(k) funds will be governed by the five-year rule applicable to the Roth IRA. If the Roth IRA has already satisfied the five-year period, then the funds that were rolled over from the Roth 401(k) are deemed to have also met the five-year period, even if they were in the Roth 401(k) for only a year. This is why, if you choose to participate in the Roth 401(k), you should also consider establishing a Roth IRA as soon as possible either through contributions or a conversion if ineligible to contribute due to the income limits.

Qualified distributions from a Roth 401(k) may be taken tax

free. A withdrawal is considered qualified when it is made

after the account holder has attained age 59½ and a

minimum of five years have elapsed since January 1 of the

year of the first contribution to the Roth 401(k) account.

Here's the catch. After you retire or otherwise leave your

employer, if you rollover your Roth 401(k) to a Roth IRA

the time during which the assets were in the Roth 401(k)

does not count toward the Roth IRA’s five year holding

period.

The five-year holding period is never carried over to an

individual Roth IRA upon rollover from a Roth 401(k). The

Roth 401(k) funds will be governed by the five-year rule

applicable to the Roth IRA. If the Roth IRA has already

satisfied the five-year period, then the funds that were rolled

over from the Roth 401(k) are deemed to have also met the

five-year period, even if they were in the Roth 401(k) for

only a year. This is why, if you choose to participate in the

Roth 401(k), you should also consider establishing a Roth

IRA as soon as possible either through contributions or a

conversion if ineligible to contribute due to the income

limits.

Remarks About Stock Market Pullback

on .

tree sunset medium 

We may have forgotten what a bumpy ride the stock market can be. The last few days have been a good reminder, with some rather large declines. We'd like to provide some perspective on this.

First, don't let the big numbers get to you. As the market has risen over the last several years, these point numbers mean less and less. It's about the percentages, not the points. Recently the Dow was down 1175 points in a day, which one news outlet labeled as the "worst point decline in history". While this may be true, in percentage terms (4.6%), it is certainly not the worst decline ever.

Five years ago, the Dow was at about 14,000. A drop of 1175 points would have been an 8% decline, almost twice as much as it is today, percentage-wise.

Second, market declines are very normal.

  • A 10% decline happens on average, once a year and last occurred in August 2015*
  • Although the market is down 10% from its January 26th high, it's still up 19% over the last 12 months.**
  • It may also be reassuring to know that the market has always recovered from declines. Although past results don't guarantee future results, remembering that downturns have been temporary may help calm your fears.

Tax Cuts and Jobs Act of 2017: What Taxpayers Need to Know

on .

mature couple doing family finances at home

CLICK HERE for a downloadable PDF of this article

On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act of 2017 (the act or TCJA). The legislation makes significant changes to the Internal Revenue Code (IRC), including individual, corporate, and gift and estate taxation.

Individual income tax changes

Under the TCJA, the changes that affect individual income tax are in effect only for tax years 2018−2025.

The act modified the marginal rates for individual income taxation. The revised seven-tier income tax rate schedule for tax years 2018−2025 is reflected in the chart below.

Tax Rate

Single

Married/Jointly

Head of Household

Married/Separately

10%

$0−$9,525

$0−$19,050

$0−$13,600

$0−$9,525

12%

$9,525−$38,700

$19,050−$77,400

$13,600−$51,800

$9,525−$38,700

22%

$38,700−$82,500

$77,400−$165,000

$51,800−$82,500

$38,700−$82,500

24%

$82,500−$157,500

$165,000−$315,000

$82,500−$157,500

$82,500−$157,500

32%

$157,500−$200,000

$315,000−$400,000

$157,500−$200,000

$157,500−$200,000

35%

$200,000−$500,000

$400,000−$600,000

$200,000−$500,000

$200,000−$300,000

37%

Over $500,000

Over $600,000

Over $500,000

Over $300,000

In addition to the changes made to the tax brackets, many exemptions and deductions for individual income tax have been modified or repealed.

  • The personal exemption of $4,150 per taxpayer and dependent has been eliminated.
  • The standard deduction for individuals has been increased from $6,500 for individual taxpayers and $13,000 for married couples who file jointly to $12,000 for individual taxpayers and $24,000 for married couples who file jointly. This near doubling of the standard deduction will result in more taxpayers taking this deduction instead of itemizing.

Important Things to Remember for VERP Participants

Written by Ed Snyder, CFP® on .

man woman beach blog 

CLICK HERE for a downloadable PDF of this article

Congratulations on your acceptance to Lilly's Voluntary Early Retirement Program (VERP). To ensure a smooth transition for your retirement we have listed a few things you will want to consider before and after separation from Lilly.  Please keep in mind some of these items may not be applicable to everyone's situation.

BEFORE DECEMBER 8TH (If you are retiring December 31st)

Go to the Lilly benefits site at: resources.hewitt.com/lilly and make the following elections before December 8th:

Pension Elections

Federal and State tax withholding elections. Set-up direct deposit to your bank for your Pension payments. If you are married, you will need to make a survivorship election.  (Single individuals will skip this step.)

Health Insurance Elections

Consider the HSA. There are multiple tax benefits. Call us to discuss details.

BEFORE SEPARATION

Get your e-mail and other contact information updated:

Do you use your work e-mail for any personal communication?  Make sure to change them to a personal e-mail before separation so you don't miss any important e-mails. Make sure you have a personal e-mail, personal cell phone, and home phone (if applicable) setup on the Lilly Benefits site as these things are used to verify your identity for some requests and to reset a password if necessary.