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In this episode, I talk to Bill Keen, CRPC, the founder and CEO of Keen Wealth Advisors, about the election year and financial planning and how it can affect you as an engineer. Bill provides some great tips on how you can be prudent when it comes to financial planning and making decisions as to not affect you and your family negatively.
Here Are Some of the Key Points Discussed About the Election Year and Financial Planning:
- With everything that has been happening of late, you need to realize that with everything that you have lived through, there is a lot of wisdom that you need to take note of. We just went through one of the fastest market declines and recovery in the history of man.
- The upcoming presidential election seems to have snuck up on us, and it will cause fluctuations in the economy. Ensure that you do not make rash decisions about your investments during this time that will affect you and your family negatively. You need to be aware that there is a bias about the economic conditions between the Republicans and the Democrats, which is based on who is in power.
- In a report from LPL Financial, since 1950, in a Republican congress, the markets have made 13.4% on average. In the same time frame, in a Democratic congress, the markets have made 10.7% on average. But under a split congress, the markets have made 17.2%. For GDP, under a Republican congress, the markets made 3%. Under a Democratic congress, the markets have made 3.3%. Under a split congress, the markets have made just under 3%.
- We define a recession as a negative two quarters of GDP. The funny thing about this is we do not get GDP readings until many weeks or months after the end of the quarters. This means that in many cases, you do not know that you are in a recession until you are already coming out of it, or it is already over.
- You cannot make your market investment decisions based on just the economy. The market looks way ahead into the future, and this is why the market is so strong now even while the economy and GDP are not. The market is a leading indicator for you to make decisions on your investments.
- Don’t get all in or all out, but you still need to be prudent when it comes to making decisions depending on the outcomes that the election can have. Keep in mind that there will be tailwinds and headwinds in some of the sectors, such as energy and healthcare.
- Biden talks about a rehaul of the tax code primarily focused on the people who earn above the $400, 000 level. Their tax percentage will be returned to 39.6%. The Pease limitation is a limitation of itemized deductions, but if you earn above the $400, 000 level, Biden will start to phase the limitations out. The qualified business income (QBI) can deduct around 20% of your business income, and Biden will be phasing this out for the above $400, 000 level.
- From the short-term planning standpoint, you need to stay the course on your investment plans and be in a comfortable place where you are not in a position of too much risk or too conservative risk. This will help you to avoid making any jerk decisions in your investments.
- From a tax standpoint, if you are earning over the $400, 000 level, you could accelerate income into this year if you are going to be getting bonuses next year. You could push back deductions from this year to next year. You need to go through a Roth conversion calculation, look at the tax brackets you are currently in, and then determine if it makes sense to convert money from an individual IRA account to a Roth IRA account. The difference between an individual IRA and a Roth IRA is you are taxed when you withdraw from an individual IRA, but you never get taxed again when using a Roth IRA.
Graph Showing the Research Compiled by LPL Financial:
Graph Showing the Research Compiled by Charles Schwab Investment Management:
More in This Episode…
About Bill Keen, CRPC
Bill Keen’s interest in finances began at an early age when he was exposed to financial hardship. In his own words, “By age 10, I knew I would have to learn to understand saving and investing to be able to eventually assist my family.”
As founder and CEO of Keen Wealth Advisors, Bill desired to build one of the country’s most personal and trusted fiduciary wealth and retirement advisory firms. With the heart of a teacher, his objective is to bring financial and retirement literacy to those serious about planning for their future. In addition, Bill and his team have a unique specialty in advising those within the engineering community on issues such as ESOP plans, compensation, taxes, and benefits planning. He brings nearly three decades of experience to the table.
Bill is the bestselling author of the book, “Keen on Retirement: Engineering the Second Half of Your Life,” which can be found on Amazon. He also co-hosts Keen on Retirement, a podcast designed to provide Keen Wealth Advisors’ friends and clients with an additional tool to stay informed and educated on key issues related to retirement planning and investing. He is repeatedly asked to share his thinking with national media outlets such as U.S. News and World Report, Reuters, The Wall Street Journal’s Market Watch, and Yahoo! Finance.
“Planning is bringing the future into the present so that you can do something about it now.” ~ Alan Lakein
Resources and Links Mentioned in This Session Include:
Keen on Retirement
Keen Wealth Advisors
TECC 227: The Impact of the Pandemic on the Stock Market: Securing Your Financial Future
TECC 214: How to Engineer Engineering Retirement
Article: Why You Want To Keep Your Politics Separate From Your Investing
Bill Keen’s LinkedIn Profile
Send Bill Keen an Email
Engineering Management Institute Training
Books Mentioned in This Episode:
Keen on Retirement: Engineering the Second Half of Your Life
How will the election year affect engineers?
We would love to hear any questions you might have or stories you might share on the election year and financial planning.
Please leave your comments, feedback, or questions in the section below.
To your success,
Anthony Fasano, P.E., LEED AP
The Engineering Management Institute
Author of Engineer Your Own Success
Please note this post does not provide financial consulting of any kind, it only serves to discuss past historical information.