Well, it’s all over except for the crying. The election results are in, but what do we have to show for it?
Our country spent $6 billion over the last six months on the campaign. Many Americans placed their hopes in a new president or a shift in control of the Senate that could bring lower taxes and reduced spending. Since that didn't happen, let's focus on what America has coming.
It looks like we may just fall right off the fiscal cliff, since we have not seen a significant shift in the Senate or House. So be prepared for tax increases early in the New Year.
Don't put off making adjustments to your financial planning strategy as a result of this one. Once it is here, it may be hard to make changes. Many economists have predicted this tax change could result in a 4-5 percent impact on the GDP. Over the last few months, I’ve written a lot about things you can do to minimize the effect that these tax increases can have on your retirement planning.
Ben Bernanke's position is pretty well locked in if he wants it. Quantitative easing (QE3) will most likely continue, meaning that the Fed will continue to spend up to $40 billion per month on longer-term bonds in hopes of driving interest rates down further. What scares me is the open-ended nature of the plan, where spending is scheduled to continue until things get better.
If they don't, they will just continue to throw money at the problem. But expect interest rates to stay very low for the foreseeable future in any event.
While many believe the 300-point decline in the stock market the day after the election is the result of Wall Street showing its unhappiness with the results, I believe that what’s happening in Europe may be contributing as well.
European Central Bank President Mario Draghi reported that economic activity will remain weak, and the slowdown may now have reached Germany (the one European country that until now was surviving the euro crisis fairly well). It seems that few, if any, countries in the eurozone will be invulnerable to an economic downturn similar to the one we are experiencing at home.
Now is the time to look inward. Turn off the TV and open up your retirement statements. Look at your 1040. Educate yourself on the changes that are coming. Sit down with your CPA or financial adviser. Ask hard questions, and don't settle for the same story you have been hearing for years.
It is up to you to make sure that you are protected. This is a yo-yo (“you’re on your own”) economy. Go get some help.
Joe Wirbick is the president of Lancaster financial services firm Sequinox. Joe specializes in retirement planning and distribution. This allows him to concentrate on developing strategies that help address the unique issues that confront retirees and those approaching retirement.
Tax information is provided for informational purposes only, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.. Tax returns should be completed in conjunction with a qualified tax professional. While we are familiar with the tax provisions of the issues presented herein, Sequinox Financial and JWC/JWCA do not offer tax advice and are not affiliated. Mr. Wirbick is an Investment Advisor Representative offering advisory services through J.W. Cole Financial Advisors, Inc.. (JWCA) and securities through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. The opinions expressed are those of Mr. Wirbick and based on information believed to be reliable but not guaranteed and subject to change and do not necessarily reflect the position of JWC/JWCA.JWC/JWCA and Sequinox are unaffiliated independent entities.