Investing in CDs, Roth Conversion strategy and some upsets in the World Cup 2022!

Dec 2, 2022 | Weekly Wrap-Up

This week was fairly quiet following the Thanksgiving Holiday.  We are still seeing housing prices decline and demand weaken amid high mortgage rates (currently around 6.50% for a 30 yr. fixed mortgage).  Job data was released this week that also shows signs of slowing.  Although it doesn’t feel like it, the stock market (S&P 500 Index) has risen 14% from October lows as the Federal Reserve works to engineer a ‘soft landing’, keeping the economy out of a recession.

 

  • CD rates have been the one bright spot in this economy.  One-year CDs can be found for close to 5%
    • Buying brokered CDs via Schwab, Fidelity, Vanguard or other Custodians will yield higher rates while still providing FDIC coverage
    • Be sure to choose a term that fits your time horizon (3 months – 10 yrs.)
    • Check to see if the CD is call protected.  If it is not, it means the bank can ‘call back’ the CD before it matures by returning your principal and interest to date.  So that 2 yr. CD at 5% you purchased, could be called back earlier.
    • Check to see the frequency of interest payments.
      • If the CD has ‘at maturity’ it means all interest will be paid once the CD matures
      • For clients who may need the funds earlier than the maturity date, choosing a CD that pays monthly means they will get accrued interest up until the month they sell the CD
  • Consider using this down market to convert Traditional IRAs to a Roth IRA
    • Lower balances mean lower taxes on conversions
    • There are various strategies on converting IRAs to Roth IRA and one of the most popular is called ‘Roth Laddering’ (aka “filling the bracket”)
  • The World Cup is upon us and there have been some exciting upsets in this tournament:
    • Morocco, ranked 22nd in the world beat Belgium who is ranked 2nd, securing Morocco a place in the last 16
    • Four-time World Cup winner Germany lost against Japan
    • Saudia Arabia has shined in this World Cup and produced perhaps the most iconic upset in modern World Cup history, beating Argentina
    • And the question everyone wants to know ~ Can the USA, as the underdog in the final 16, pull off an upset against Netherlands?
  • And in other news we lost a music icon, Christine McVie, keyboardist and singer for the legendary band Fleetwood Mac. She will be missed ☹