LAKESHORE FINANCIAL PLANNING QUARTERLY NEWSLETTER
IN THIS ISSUE The Big Picture with Jeff Brayton
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Book Recommendation
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Quote of the Quarter
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Financial Planning with Mark Romin
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Office News and Events
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Team Updates
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Jeff Brayton-Senior Advisor Mark Romin, CFP®-Senior Advisor Pat Johnson-Chief Compliance Officer Tina Houle-Client Service Associate Sarah Rangstrom-Client Operations Associate
4th Quarter 2023
YOU’RE INVITED TO OUR
HOLIDAY PARTY
Wednesday, December 6th, 2023 5:00 – 5:30 Drinks 5:30 – 8:00 Dinner Assumption Cultural Center 21800 Marter Road St. Clair Shores, MI 48080 PLEASE CALL OR EMAIL TINA FOR RESERVATIONS (586) 498-0788 TINA.HOULE@LAKESHOREFINANCIALPLANNING.COM
23201 Jefferson Avenue St. Clair Shores, MI 48080 (586) 498-0788 lakeshorefinancialplanning.com
THE BIG PICTURE WITH JEFF BRAYTON
Stein’s Law: “If something cannot go on forever, it will stop.” Herbert Stein American economist Former Chairman Council of Economic Advisors
Herbert Stein was a free market economist born right here in Detroit in 1916. He made this simple, yet deceptively smart observation after studying economic trends, such as rising US federal debt in proposition to Gross Domestic Product. Stein’s Law implies that if any process is limited by external factors, there is no urgency for government intervention to stop it. It will stop of its own accord.
stocks, and to ignite a banking crisis this past spring. However, to nearly every economist’s surprise, the US economy has continued to strengthen and grow while inflation has moderated. The majority of economic growth has been from the US consumer. Unemployment remains near a record low, and wages have risen across all income levels. Household’s median net worth climbed 37% from 2019 to 2022, according to the Federal Reserve’s Survey of Consumer Finances. This is an all-time high, which is very good news.
Unlike most economists employed by the Federal government, Mr. Stein looked for reasons to not meddle in the day-to-day working of the US economy. He observed that consumers will continue to spend until they run low on money, and that the best cure for high prices is high prices. We know from experience that people drive less when gas prices are high, and this lowers demand and brings prices down. Our economy is loaded with organic limits and self-correcting mechanisms. If only we had more economists in DC willing to allow these external forces to run their course and not intervene at every hint of crisis.
There is no question that for many American families, the increase in prices since the onset of the pandemic means that wealth doesn’t feel as good as it sounds. However, despite what the politicians are telling us, there is growing evidence that wealth inequality has actually narrowed over the past two years. We still have a long way to go, but wages for the bottom 10% of workers have increased at a much faster rate than the top 10% (Source: WSJ).
I’m bringing this up now because the Federal Reserve for the past year has been on nothing less than a crusade to increase interest rates enough to slow the economy and stop inflation in its tracks. Thus far, the result of the Fed’s action has been to pummel an already beaten up bond market, cause extreme volatility in
The problem, at least until very recently, is that the Fed has viewed the strength of the US economy as a reason to continue raising interest rates. In case you were wondering, this is why stocks often fall when good economic news is released.
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THE BIG PICTURE WITH JEFF BRAYTON
March 18, 2019
I won’t bore you with the details of economic modeling the Fed does to forecast future inflation, but according to their models, the economy should not be able to grow 4.9%, as it did in the 3rd quarter, with inflation simultaneously moving lower. This has set off a healthy debate within the central bank about how closely it should follow its traditional models of the economy. “We need to be extra careful about indexing policy to traditional models”, said Chicago Fed President Austan Goolsbee in a speech last month. I know this is dry and technical, but it represents a big challenge to traditional thinking.
Martin & Marsha Lynch
In his most recent comments, Fed Chair 43347 Trlthat the Jerome Powell gave a strong Nebel indication Clinton Twp MI 48038-2465 central bank may be changing its opinion on the necessity to raise interest rates. Aggregate demand for all goodsDear and services grown Martinhas & Marsha: rapidly, and this is generally inflationary. However, the aggregate supply of goods and I love sending WorthWhile m services has grown just as quickly. Remember mix of dealing cultural, and all those shortages we were withfinancial until latest of Raymond Ja fairly recently? A supply side edition boom generates the best of all worlds: brisk growth and falling inflation. The Spring edition takes us
guide for surviving in just ab
Going back to Stein’s Law, inflation spiked planning. after the pandemic, and prices ran higher until the natural external force of increasing supply stopped it. We still don’t knowofhow the tell me th Many mymuch friends Fed’s action helped, or possibly even everyone, andhurt, I believe there this process. What we do know is that inflation thoughts when you can. I alw is slowing, while growth remains strong. If this trend continues, it should be a positive development for bothSincerely, bonds and stocks as we enter the final months of 2023.
I personally believe the pandemic shutdowns, supply chain disruptions, and massive government stimulus caused economic dislocations, and may have at least temporarily broke down the growth-inflation link. This opinion may be gaining some traction. On a quick side note, one of the benefits of writing our own newsletter, instead of farming it out to a third party like most advisory firms, is that it gives Mark and I the ability to share our own opinions with you. We hope you find insights in our newsletter that you will not hear or see from the mainstream media. It’s not always the easy road, but we love it!
Jeffrey Brayton Financial Advisor Book Recommendation Branch Manager
Quote of the Quarter
“How Innovation Works: And Why It Flourishes in Freedom.” By Matt Ridley
“Never before has the US created so much wealth in a short period, and what makes the increase even more difficult to believe is it occurred during the worst healthcare crisis in 100 years and the sharpest plunge in economic activity on record.”
The story behind most innovations — from steam engines to search engines — is far more nuanced, and even more random than I realized. Innovation remains a mystery, but we know it happens in societies where people are free to think, experiment, and speculate.
Joseph Carson Alliance Bernstein
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FINANCIAL PLANNING WITH MARK ROMIN
“Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn’t, pays it”. Albert Einstein
Unused 529 Plans Can Be a Useful Tool for a Child’s Retirement Plan
• Rollovers can all be done tax-free and penalty-free starting in 2024.
Throughout my career I have advised clients not to overfund a child’s educational 529 plan. The reason was because if the funds were NOT used for qualified purposes like college tuition, room and board, or books/laptop, the IRS would penalize you. The penalty comes in the form of paying tax on the gains as well as an additional 10% penalty tax.
At a time when it is very easy to take shots at Congress and be discouraged about some decisions being made, this is nothing but great news! If this situation applies to you, please don’t hesitate to contact our office. I’ll also take this opportunity to encourage clients to consider opening a Roth IRA for kids/ grandkids across the board as a great way to gift and help them save for retirement. I mentioned last quarter that my daughter Emma recently started her first job. As a result, she now has W-2 income making her eligible for Roth IRA contributions at the age of 16. I’ve recently opened her a Roth IRA, of which I am the owner until she reaches age 18. I’ve also agreed to match her contributions. Over the coming years, I look forward to letting her see the power of compound interest and investing at a young age.
However, new legislation by congress has put some of these concerns to rest with a new provision to allow for a rollover into the beneficiary’s Roth IRA account. Now parents with unused 529 assets can give their kids a head start in planning for their retirement. Before you get too excited, let’s make sure your child’s 529 plan meets the requirements: • The Roth IRA must be for the same beneficiary named in the 529 plan. • The 529 plan must be open for more than 15 years before it’s eligible to roll into a Roth IRA. • 529 contributions made within the prior 5 years cannot be rolled into a Roth IRA. • Rollovers are subject to annual Roth IRA contributions, $6,500 per year ($1,000 catch-up over 50) with a lifetime maximum of $35,000.
Here is an illustration assuming 7% returns and the impact time in the market has on your investments. You’ll notice Jack (blue) starts investing at age 25 and stops 10 years later at age 35, but keeps the money invested until age 65 for a total of 40 years. Jill (green), on the other hand, starts investing at age 35 and continues to invest until age 65 for a total of 30
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FINANCIAL PLANNING WITH MARK ROMIN years. In the end, Jack contributes 1/3 of the amount Jill contributes, but ends up with more at age 65. This is because of those extra 10 years Jack is invested in the market.
Again, we’d love to help you begin the investing process with your kids or grandkids. This is especially true if either of the above scenarios applies to your situation. Please do give us a call with any questions.
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OFFICE & EVENTS UPDATE In October our team enjoyed a three-hour tour through various sections of Detroit. We started in Corktown with lunch at Ottava Via. If you haven’t been there lately, Corktown is booming as Ford Motor Company finishes its restoration of Michigan Central Station. We moved on to Downtown where we stopped in several historic buildings, including the Guardian Building (photos below). Even for native Detroiters, it’s easy to forget the amazing history and architecture in our own city. En route to our final destination of the New Center area, we stopped in at the Shinola store and Third Man Records. We concluded our afternoon with a walking tour of the Fisher Building, which is still considered one of the greatest works of architect Albert Kahn. I had no idea the original plan was to construct a complex of three buildings, with a 60-story tower flanked by two 30-story structures. The Great Depression caused the project to be scaled back to one 30-story building. The majority of the Fisher Building is now owned by Michigan State University.
Our compliance regulations exclude me from endorsing any company in our newsletter. However, if you want the name of an excellent Detroit tour company and guide, please give us a call. We hope that you will join us on Wednesday, December 6 for our annual party at Assumption. Thank you for taking the time to read our newsletter and for your continued trust and confidence. Jeff Mark Pat Tina Sarah
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TEAM UPDATES Tina Houle
Pat Johnson
Jeff Brayton
Danielle and Tyler joined us for a late season Tiger’s game
Mary Ellen with me at Eastern Market for Detroit Festival of Books
Brewery in Nantucket-Girls trip
Daughter Emily , son-in-law Robert and their kids on wedding day
Tim with his coworkers after delivering a speech on microbiology at U of F
Mom and bride on her special day
Attending Dallas National Compliance Conference Mark and Tina say a quick hello before running the Detroit Marathon
Attending a wedding at Grosse Pointe War Memorial
Sarah Rangstrom
Weekend vacation at Mackinac Island
Mark Romin
Homecoming for Ben and Emma
Sarah with nephew Emmitt visiting NY for Labor Day
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Annie’s first cross country season-following in Dad’s footsteps
Lakeshore Financial Planning 23201 Jefferson Ave St Clair Shores, MI 48080
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