The year is coming to an end and we face the hope and optimism of a better year coming to us. One thing that was really good this year was the stock market with huge gains pretty much across the board. However, I can tell you three downsides to the great 2023 upside about the stock market’s increases… for some people.
- The large increases will raise the 2024 Required Minimum Distributions (RMD) for those who need to take distributions from their retirement accounts and who do not need to live off that money. Basically, they will withdraw what they must, pay the tax and then deposit the balance in their personal investment account. In effect, they will have less money to invest going forward. However, if you are in this situation, it also means you are pretty well off, so no crying towel from me. Further, with the higher 2024 RMD, you can look forward to an increased Adjusted Gross Income and, therefore, higher Medicare insurance payments that will be deducted from your 2026 Social Security benefits.
- If you are a short seller, you’ve likely taken a bath on this. That’s not so good, and you have my sympathy.
- People who are accumulating wealth now by investing through 401k or 403b plans, individual retirement accounts or similar types of plans, or who set up a plan for the automatic periodic purchase of shares will be buying fewer shares because of the increased prices. These investors are acquiring shares today, hoping there will be significant growth when they retire and are ready to start withdrawing funds to live off of. Higher prices might make them feel better now because of the growth in their portfolio, but they will be paying higher prices for new acquisitions. Not so good. However, it is what it is. We can only do the best we can. Nothing is perfect. Hopefully, the many years they will have these investments will provide huge gains for them.
My first three blogs in January will have 16 charts illustrating the stock and financial markets’ performance along with inflation and a dissection of components of the major stock market indexes. I use these charts in my speeches, plus when I advise clients on their personal financial planning. Additionally, I like doing them, and it also helps me focus my attention on my own portfolio and provides a perspective on what I should do.
When I am finished with the charts, I will provide my comments on what happened in 2023 and then will update my 100+ page speech handout. I seem to keep adding new data each year. I will be presenting a speech on the stock market either at the end of January or the beginning of February for the East Brunswick Public Library (ebpl.org), which has now become an annual program. When that date is set, I’ll post the free registration information on one of my blogs.
Let me leave you with a thought for the new year. With the stock market near its all-time highs, you should consider taking some money out of the market and propping up your rainy-day fund. I just did it, and having the extra cash is a good feeling. Plus, the money market rate is still pretty good. An alternative to the money market account is to lock in a current rate with a series of 6-month, 12-month and 18-month bank certificates of deposit.
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