Comprehensive Financial Planning – What’s your plan?


With the election over and President-elect Biden warming up to steer the ship into 2021 and beyond here is what I’m thinking about:

It’s all about the debt.

Once upon a time Presidents would sometimes oversee a contraction in the national debt. But you’d have to go back a hundred years to find an example of it. Of late Presidents have been spending money like drunken sailors. I’m not kidding. Look at the numbers for yourself1:

National Debt

Trump will be leaving his post with the US in a deeper hole than he found it. And before you feel the urge argue otherwise, please note that if history is any guide Biden will just make the problem worse.

Rather than lament these facts let’s talk about what to do about it:

#1 – Work out a plan for tax mitigation

It’s a near certainty that taxes will be higher in the future. We already know that the Trump tax cuts are scheduled to expire after 2025. But it’s quite possible that certain political initiatives like Medicare-for-All, green energy initiatives or student loan forgiveness could force even higher rates. So while it’s important to focus on the rate of return you’re getting on your portfolio you may also want to start paying mind to how much of that portfolio you’re even going to be able to keep after the IRS takes it’s bite. Roth conversions and other tax mitigation tools are going to be more popular than ever.

#2 – Pay attention to your interest rates (or lack thereof)

Currently the interest paid on the outstanding national debt is our country’s fourth largest annual expense. That means that even a small increase in rates will put Congress on its knees. It’s no wonder that Federal Reserve chair Jerome Powell announced that interest rates will most likely stay at record lows for many years to come.

Low interest rates are great for borrowers. It’s still not too late to take advantage of refinancing your debt at bargain basement prices. But low interest rates are a nightmare for savers. Many traditional safe havens like CDs and Treasury Bonds are paying sub-inflationary rates of return. And when you’re earning a rate of return that’s less than inflation you are de facto losing money. Being too conservative can exact a painful toll on your savings.

#3 – Be optimistic

Recent news indicates that we may have a vaccine on the way for COVID-19. The last time we got a pandemic under control in this country it ushered in the Roaring 20s. There’s a lot of pent up consumer demand just waiting to be unleashed. People may soon be returning to work, leisure and travel in an unprecedented wave of exuberance. That’s great news for the stock market. And if the economy can roar back to life it would certainly help some of our debt woes. Being poised to ride that wave in some capacity may be the right move for a lot of investors heading into 2021.

What’s your plan?

Do you have a plan to offset higher rates of tax? What about fighting inflation? Or being positioned for the Roaring 20s of the 21st century! Fortune favors the bold. Have a plan. Let us know if we can help.

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