Investment News

On December 20th, 2019 President Trump signed a $1.4 trillion bipartisan spending package which included the SECURE Act. The bill includes changes that will impact Individual Retirement Accounts (IRAs), as well as 401(k) plans and traditional pension plans.

The SECURE act makes several minor changes to 401(k) plans. Businesses can receive a larger tax credit for starting a new retirement plan. Businesses can also benefit from a new tax credit for launching a plan with automatic enrollment of employees. Under the new law, more part-time employees will be eligible to participate in 401(k) plans. The limit for automatic increases of participant contributions was raised to 15% of salary.

The new law also includes benefits for retirees and older workers. People who choose to work beyond traditional retirement age will be able to continue making IRA contributions as long as they are earning income.

Uses of 529 Plan Funds Expanded

The SECURE act has provisions that will greatly help parents who are saving for their children’s education. These provisions expand the list of allowed tax-free uses of funds in 529 plans. Starting in 2020, 529 plan distributions can be used to pay for apprenticeship programs. Only apprenticeship programs registered and certified with the Department of Labor will qualify for a tax-free distribution. Tax-free distributions from 529 plans can also be used to make qualified student loan repayments. The lifetime limit for loan repayments is $10,000.

Insurance Companies Want Your 401(k) Plan

The SECURE act contains some provisions that are less than favorable for retirement savers. The new provisions, lobbied for by the insurance industry, are an end-run around attempts to regulate the sales of insurance products to retirement plans. The insurance industry previously won its fight against the Department of Labor’s fiduciary rule. The SECURE Act’s new annuity-friendly provisions will protect employers from much of their responsibility for fiduciary obligations if they allow insurance companies to sell products inside their retirement plans. Participants in retirement plans will have to watch their plans more carefully and be sure they understand what they are investing in.

Higher Age for IRA Required Minimum Distributions


Previous regulations required individual retirement account owners to begin taking distributions after age 70½. The new law increases this to age 72. The new, higher age will help retirees who don’t need immediate income from their retirement accounts. It will also help retirees who continue to work into their 70’s. IRA owners who turn age 70½ in 2020 or later will benefit from the increased age limit.

Changes to Inherited Retirement Accounts – “Stretch IRA” Eliminated

Under the previous law, if you inherited an IRA, you could spread out distributions from the inherited account over your lifetime. This strategy was known as a “Stretch IRA”. Stretch IRAs offered two benefits: the inherited account could continue to grow tax-deferred, and the tax bill would be spread over many years.

The new law requires inherited retirement accounts to be distributed within 10 years. There are exceptions for spouses, disabled individuals, and individuals no more than 10 years younger than the account owner. There is also a partial exception for accounts inherited by minors.

The new law will significantly increase income taxes for some IRA beneficiaries. These changes will also impact estate planning and trusts created to managed inherited IRA assets. Roth conversions are one tool that IRA owners can use to better manage the tax impact of accounts that will be left to beneficiaries. If you have an IRA that you intend to leave to a beneficiary, or if you expect to be the recipient of an inherited IRA, it is wise to seek professional advice on how the new law will impact your planning. The new rules place IRAs at the intersection of estate planning and income tax planning. It is crucial to seek advice from an advisor competent to practice in both areas.

The act’s provisions are set to become law on January 1st, 2020. For help understanding how the SECURE act will change your retirement plan, consult a tax and financial planning professional.

Matthew Treskovich is the Chief Investment Officer for CPS Investment Advisors

Avoid Surprises at Tax Time: Check Your Withholding Now

The Tax Cuts and Jobs Act of 2017 reduced taxes on 80% of all Americans. The IRS has updated the forms and tables for income tax withholding to reflect the new rates. The new rates and withholding tables could mean surprises for some workers at tax time next year. It is important to understand how withholding works and what these changes mean for you.

How Income Tax Withholding Works

Most working Americans have estimated income taxes taken out of each paycheck throughout the year. Employers take a part of each employee’s paycheck and send it to the IRS. This system is called “withholding”.

When the year is over, your employer totals up the withholding for income tax and lists the amount on your Form W2. This form also has other details on your earnings, and on payroll tax payments.

Withholding from your paycheck for income taxes is based on an estimate of what your income tax bill will be. The actual amount of income tax you owe is determined when you file your personal income tax return.

Your “tax return” is the set of paperwork you send (by mail, or electronically) to the IRS showing your income, deductions, and tax payments. Your “tax refund” is the money you get back if you overpaid your taxes during the year. Personal income tax returns are usually due by April 15th of the following year.

If the amount withheld from your paychecks during the year is greater than the amount of income tax you owe, you receive a tax refund. If you didn’t pay enough tax throughout the year, you may have to pay a penalty for underpayment of estimated tax.

New Tax Law Means New Withholding Tables

The IRS provides a form called Form W4 that employees use to  provide withholding instructions to their employer. Changes to this form will change the amount of tax withheld from each paycheck. The IRS also gives employers a set of tables called “withholding tables”. Employers use the withholding table, and the employee’s Form W4, to determine how much tax should be withheld from each paycheck.

The Tax Cuts and Jobs Act provides new, lower income tax rates for the majority of workers. Because most workers will have a lower  income tax bill, the IRS has released new withholding tables to reflect the lower rates. Under the new tables, less tax will be withheld than last year for the same amount of earnings. For many workers, the new tables will suffice. However, some taxpayers may find that the new tables do not withhold enough estimated tax.

You can perform a quick “paycheck checkup” using the IRS withholding calculator at . Ask your tax advisor for an estimate of your 2018 taxes. If it looks like you will owe more than is being withheld, you can file an updated W4 to request extra withholding. When it comes to possible underpayment of income taxes, the sooner you start to fix it, the better!


Peter C. Golotko is president and CEO of CPS Investment Advisors. Matthew Treskovich is the Chief Investment Officer for CPS Investment Advisors.

By Matthew Treskovich, CPA/PFS, MBA, CFP®, CMA

In the second quarter, markets continued to recover from the correction earlier in the year. The Federal Reserve increased interest rates again in June. Fundamental economic data continued to paint a positive picture. The job market remained strong, and consumer spending trends hinted at further growth.

US consumers and workers continue to do well

Heading into the 2008 recession, consumer debt as a percentage of disposable income was at a 30-year high. In the years following the recession, consumer debt as a percentage of income fell to a 30-year low. Through the end of the second quarter, consumer debt remains at historically low levels. Earlier in the year, we saw that in some regions there were more open jobs than individuals looking for work. This situation has expanded to cover the entire country. There are now more job openings in the United States than unemployed workers. Almost 70% of the US economy is consumer spending.  Low debt and good employment prospects mean that consumers will likely continue to spend money. A recession caused by declining consumer spending is not likely this year.

Global economy still expanding

The global economy is still in expansion, although some parts of the world appear to be slowing. The steady and synchronized global economic growth we saw last year has given way to a more volatile environment this year. In the United States, economic indicators are still positive. In other parts of the world such as China, there are signs of slowing growth. Earnings growth for US companies continues to improve. The earnings growth of companies in emerging markets appears to be slowing. Tariffs are still a risk to global economic growth, but an all-out trade war is not the most likely outcome.

Diversification is still important

In 2017, large company stocks outperformed small company stocks.   So far this year, we’ve seen the opposite occur. Through the end of the second quarter of 2018, small company stocks have outperformed large company stocks. This is a great example of why it is important to stick to a consistent diversified asset allocation. In any given year, certain parts of the market will outperform, and other parts will under-perform. Proper diversification means having the right mix of different assets in your portfolio. Periodic re-balancing helps keep your portfolio properly diversified. Both of these things are very important for investors to who want to achieve and maintain financial independence.

Long term investors know that chasing performance reduces returns. A properly diversified, periodically re-balanced, portfolio is still the best way to get good returns and reduce risk in the long run.

Matthew Treskovich is the Chief Investment Officer for CPS Investment Advisors.

Protecting Your Portfolio from Tariffs and Trade Wars

Matthew Treskovich, CPA/PFS, MBA, CFP®, CMA

For much of the past few months, talk of tariffs and trade wars has dominated the news. For the past several decades, US trade policy has consistently favored globalization. Trade policy has favored the easy movement of goods across borders. US policy has also allowed the easy movement of production from the United States to other counties. Policymakers in the US and abroad now seem to be more willing to enact policies that restrict trade. This could indicate that globalization is decelerating. There are other signs of declining globalization, with production of goods being moved back into the United States.

What does a decline in globalization mean for investors?

Globalization has generally been a positive trend for investors. Large US companies have generally benefited by being able to move production overseas. This allowed those companies to reduce costs and increase profits. Moving production overseas has also had negative impacts on investors. Almost seventy percent of the US economy is personal spending. Lower wages and job losses due to globalization have reduced personal spending. This effect has offset some of the benefits of globalization for investors.

The biggest risk to investors is the uncertainty that could come with shifting to a less-globalized system. In the stock market, uncertainty usually means volatility. Higher volatility doesn’t always mean lower returns, but it can cause investors to make mistakes that can cost them money.

The headlines move faster than the fundamentals

Headlines in the news change every day, but economic fundamentals don’t change overnight. Talk of tariffs has been in the news since January. So far, only a small number of imports are subject to new import taxes. Other countries are starting to enact their own tariffs in response, but it will be time for the effects to show up in the economy. If tariffs have a large negative effect on the economy, it is possible they could be removed as quickly as they were created.

For long term investors, the key to surviving a trade war is having a properly diversified, well-balanced portfolio. Investors who have concentrated positions in companies that could be hurt by tariffs should consider diversifying their portfolios. Long term investors should resist the temptation to make changes to their portfolios based on short-term news. This is especially true when the news is more about politics than economics. In the short run, escalation of tariffs and talk of trade wars could cause market volatility. Long term investors should focus on their financial plan instead of the headlines. Investing in great companies in America and the world is still the best way for investors to achieve and maintain financial independence.

Matthew Treskovich is the Chief Investment Officer for CPS Investment Advisors.

By Peter C. Golotko, CPA/PFS, MBA, and Matthew Treskovich, CPA/PFS, MBA, CFP®, CMA

People often think estate planning is only for the wealthy. Actually, just about everyone who owns property or has money needs an estate plan. Estate planning is more than deciding what happens to your property when you’re gone. It also includes the planning during your life that leads to creating and safeguarding assets like your retirement savings. Estate planning is an important part of protecting your financial security.


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