2020 VIRTUAL WEALTH MANAGEMENT FORUM...FORUM October 15, 2020 ECONOMIC AND MARKET OUTLOOK Brandon A....
Transcript of 2020 VIRTUAL WEALTH MANAGEMENT FORUM...FORUM October 15, 2020 ECONOMIC AND MARKET OUTLOOK Brandon A....
2020 VIRTUALWEALTH MANAGEMENT
FORUM
October 15, 2020
ECONOMIC ANDMARKET OUTLOOK
Brandon A. Zureick, CFAPORTFOLIO MANAGER, DIRECTOR, PRINCIPAL
Charles E. Rinehart, CFA, CAIA PORTFOLIO MANAGER, MANAGING DIRECTOR, PRINCIPAL
-12.9%
-11.6%
-2.5%
-4.4%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
1932(Great Depression)
1946(WW II)
2009(Financial Crisis)
2020Forecast
REAL GDP Year Over Year Percent
2 02 0 RE CE SSI O N I N CO N TE XT
SOURCE: BLOOMBERG
0
100
200
300
400
500
600
700
800
INITIAL JOBLESS CLAIMS (000'S)
SOURCE: BLOOMBERG
UN PRE CE DE N TE D JO B LO SS
INITIAL JOBLESS CLAIMS (000'S)
0
1000
2000
3000
4000
5000
6000
7000
8000
INITIAL JOBLESS CLAIMS (000'S)
SOURCE: BLOOMBERG
UN PRE CE DE N TE D JO B LO SS
INITIAL JOBLESS CLAIMS (000'S)
2000
2200
2400
2600
2800
3000
3200
3400
3600
12/31/2019 1/31/2020 2/29/2020 3/31/2020 4/30/2020 5/31/2020 6/30/2020 7/31/2020 8/31/2020
S&P 500
-34%1 month
+61%5 months
A V O L A T I L E Y E A R F O R T H E M A R K E T
SOURCE: FACTSET
SOURCE: TRANSPORTATION SECURITY ADMINISTRATION
E C O N O M I C R E O P E N I N G – A R E W E T H E R E Y E T ?
0
500
1,000
1,500
2,000
2,500
3,000
3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020 8/1/2020 9/1/2020
DOMESTIC TSA CHECKPOINT ACTIVITY (000’s)
2020 2019
TH E M ARK E T I S H I STO RI CALLY CO N CE N TRATE D
SOURCE: FACTSET
TH E W H I TE H O USE DO E SN ’ T DRI VE TH E M ARK E T
GROWTH OF A DOLLAR INVESTED IN THE S&P 500January 1928 – September 2020
SOURCE: BLOOMBERG
OVERVIEW OF CONTRASTING
TAX PLANS
Anthony C. Kure, CFP® DIRECTOR OF NORTHEASTERN OHIO MARKET,
SENIOR PORTFOLIO MANAGER, PRINCIPAL
Mary P. Burns, Esq. VICE PRESIDENT OF ESTATE PLANNING,
TRUST COUNSEL, PRINCIPAL
BI DE N TAX PRO PO SALS VE RSUS CURRE N T LAW
Raising top tax bracket from 37% to 39.6% on income over $400,000
Capping itemized deductions at 28% of their value for high earners even with elimination of the SALT cap
Considering changes to 401(k) deduction to 26% capped maximum tax “credit”
Increase capital gains rate to ordinary income tax rate on income > $1,000,000 (39.6% + 3.8% = 43.4%). Currently 20% + 3.8% = 23.8%.
6.2% Social Security payroll tax at $400,000+ wages. Currently 6.2% on wages up to $137,700.
28%
%
Increase corporate tax rate to 28% with 15% minimum tax on large corporations. Currently 21% with no minimum tax.
Increase credit for child and dependents to $8,000, or $16,000 for two or more children (likely subject to income phaseouts). Currently $3,584 for one child, $5,920 for two children and $6,660 for three or more children (subject to income phaseouts).
BI DE N TAX PRO PO SALS VE RSUS CURRE N T LAW
BI DE N TAX PRO PO SALS VE RSUS CURRE N T LAW
Proposed elimination of the step-up in basis for inherited capital assets. Step-up in basis is currently allowed.
Federal estate tax exemption proposed to be lowered from $11.58 million (for 2020) back to pre-tax reform levels (around $5 million), which would subject more estates to the tax • NOTE: this is currently scheduled to occur at the
end of 2025
* Beginning in 2011, the Gift/Estate Tax Applicable Exclusion is portable between spouses, allowing the surviving spouse during lifetime, or the surviving spouse's estate, to apply the unused portion of a deceased spouse's Applicable Exclusion. As of 1/1/2026, the Exclusion returns to the 2017 Exclusion, adjusted for inflation (currently projected to be $6,400,000 in 2026).
YEAR GIFT TAX EXCLUSION HIGHEST GIFT/ESTATE TAX RATE
ESTATE TAX EXCLUSION
2013 $5,250,000*(indexed)
40%$5,250,000*
(indexed, minus Gift Tax Exclusion used)
2014 $5,340,000*(indexed)
40%$5,340,000*
(indexed, minus Gift Tax Exclusion used)
2015 $5,430,000*(indexed)
40%$5,430,000*
(indexed, minus Gift Tax Exclusion used)
2016 $5,450,000*(indexed)
40%$5,450,000*
(indexed, minus Gift Tax Exclusion used)
2017 $5,490,000*(indexed)
40%$5,490,000*
(indexed, minus Gift Tax Exclusion used)
2018 $11,180,000*(indexed)
40%$11,180,000*
(indexed, minus Gift Tax Exclusion used)
2019 $11,400,000*(indexed)
40%$11,400,000*
(indexed, minus Gift Tax Exclusion used)
2020 $11,580,000*(indexed)
40%$11,580,000*
(indexed, minus Gift Tax Exclusion used)
ANNUAL GIFT TAX EXCLUSION
GIFTS 2019 2020
GIFTS PER PERSON $15,000 $15,000
JOINT GIFTS BY SPOUSE $30,000 $30,000
C U R R E N T F E D E R A L G I F T A N D E S T A T E T A X
YEAR END TAX PLANNING STRATEGIES
It’s critical to proactively plan before year-end as many provisions and strategies end on December 31, 2020.
Don’t Delay: even waiting until the last week of December might be too late to allow for processing, mail, etc.
TI M I N G I S K E Y
Whether or not the RMD was taken and taxable within 2020, is where tax planning discussion should start
CARES Act waived requirement for distributions for many (but not all) so could be fantastic tax planning year as “window” of low income in 2020
UNIQUE PLANNING OPPORTUNITIES IN 2020
Use this “low income” year to your advantage
Managing Capital Gains Income with Loss Harvesting
Re-Visit Roth Conversions
Qualified Charitable Distributions (QCD) still an option – even at 70½ and not 72
2 02 0 CARE S ACT PLAN N I N G STRATE G I E S RM D AG E
Max out retirement and Health Savings Account (if available)
Charity AGI limitations “loosened up”
Coronavirus-related distributions available
2 02 0 PLAN N I N G STRATE G I E S N O T RM D AG E
Many provisions but major changes include:• Taxpayers over 70½ can now deduct Traditional IRA
contributions with earned income, including spousal
• RMDs for Traditional IRAs now can start at age 72 for those who turn 70½ AFTER 12/31/2019
• 529 plan funds can now be used up to $10,000 (lifetime limit) to pay down student loans
The Big Change: Meaningful change to the rules around “Stretch IRA”
SE CURE ACT CO N SI DE RATI O N S
Prior to SECURE Act:Beneficiary of IRA could stretch IRA over lifetime• Continued deferral• Asset protection
SECURE Act:• Beneficiary of IRA must withdraw assets from IRA and
recognize income tax within 10 years
Planning Ideas
I N H E RI TE D I RA – TH E N & N O W
To retain benefits that inherited IRA provided, consider directing IRA assets to trust• Asset protection• Deferral of payments
E STATE PLAN N I N G W I TH I RA
To retain benefits that inherited IRA provided, consider directing IRA assets to trust• Asset protection• Deferral of payments
Charity• DAA permitted at death
E STATE PLAN N I N G W I TH I RA
JOHNSONINV.COM | 800.541.0170
TH AN K YO U!
Jason O. Jackman, CFAPresident, Chief Investment Officer, [email protected]
Mary P. Burns, Esq.Vice President of Estate Planning, Trust Counsel, [email protected]
Anthony C. Kure, CFP®Director of Northeastern Ohio Market, Senior Portfolio Manager, [email protected]
Charles E. Rinehart, CFA, CAIAPortfolio Manager, Managing Director, [email protected]
Brandon A. Zureick, CFAPortfolio Manager, Director, [email protected]
S P E A K E R C O N T A C T I N F O R M A T I O N :
Any expectations presented should not be taken as a guarantee or other assurance as to future results. Our opinions are a reflection of our best judgment at the time this presentation was created, and we disclaim any obligation to update or alter forward-looking statements as a result of new information, future events or otherwise. The material contained herein is based upon proprietary information and is provided purely for reference and as such is confidential and intended solely for those to whom it was provided by Johnson Investment Counsel.
Johnson Investment Counsel does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.