KM Financial Newsletter



SO—we are being tested once again by the fickle market.  We thank all of you who have accepted that this as just another market blip that we have seen many times.  We have faith that we will see that high again although we know the path is never without obstacles.  This current down market has provided a buying opportunity for several clients who were happy to have the opportunity to buy on a market low.  And we are happy to report that the remainder of you are holding steady the course. 

We have a few items that we call to your attention.  The first is to please review your named beneficiary on your IRAs, other investments and checking/savings accounts.  If there are changes in your life, you might have to change your beneficiaries.  Maybe you should check with the attorney who wrote your trust to make certain that you are compliant.  If you must make changes, please contact us and we will assist you.

            Second, if you have turned 70 ½ this year, you should have received a notice from the fund family holding your IRA.  If it is still on your “pile”, get it out and give us a call.  We will guide you through the form so that your Required Minimum Distributions (RMD) will begin on time.

            Third, if there have been any changes in your income this year, it is a good idea to speak with your CPA to make certain that you have enough income withheld for taxes.  We are in the fourth quarter as you well realize so there is not much time to take care of this important matter.  We surely do not want you to be underpaid come the end of the year.  No one likes to be penalized for underpayment.

            Fourth, many folks do their charitable contributions during the fourth quarter.  This is just to remind you, if it is your habit, to remember the charities you support.  Also, please be on the alert for scams especially at this time of year.  Stick with charities that you know are legitimate.

            Fifth, there was a segment on the TV news regarding the new chip credit cards. Apparently scammers are just delighted with this new opportunity.  They are calling and asking for credit information.  Credit companies do not call and ask for personal information.  Be aware and alert!

            Sixth, if you check your credit rating every year and you should, this is a good time to do it.  Do not put it off.  We get mighty busy during the holidays.

Capital Group World Markets Review—August 2015—Global stocks plummeted as fears that China’s economy may be weaker than previously expected hit every sector of the markets.  Financial and consumer discretionary stocks fell the most, particularly those with high exposure to Asia.  Defensive sectors, such as utilities and telecommunication services, fared somewhat better.  High-grade bonds were essentially flat amid concerns about rising U.S. interest rates.  The dollar lost ground against the euro and the yen.

Medicare Part B Premium Spike (American Action Forum—2016)  A little used social security payment rule and its connection to Medicare Part B premium increases has become a concern for many policy makers.  Part B premiums will increase by half for 25 percent of enrollees, while the other 75 percent of beneficiaries will be spared any premium increase at all due to a Hold Harmless provision.  A July report on Social Security Cost of Living Adjustment (COLA) indicated there will be no 2016 increase in payments to offset the Medicare Part B premium increase but a Hold Harmless provision will protect three-quarters of Medicare beneficiaries from these premium increases while shifting the entire burden to the other 25 percent of beneficiaries.

Here are the Medicare Part B projections for 2016. (Mary Beth Franklin, Investment News, August 31, 2015)

  • Less than $85,000 income: $159.30 per month

  • $85000 to less than $107,000 income: $223.00 per month

  • $107,000 to less than $160,000 income:$318.60 per month

  • $214,000 to more than $428,000 income:$509.70 per month.


Please note that this is per person not per couple and this is a projection at this point.

Top Tax Issues for 2016 (Financial Planning, September 30, 2015)—Concerns that you might face next year

1.  Millions of people will now continue to have access to affordable health care in the states which did not establish marketplace health care exchanges. 

2.  The individual mandate penalty increases to the higher of 2 percent of yearly household income or $325 person per year with a maximum penalty per family for those using this method of $975. 

3.  The Form 1095-B and Form 1095-C,   optional for year 2014, must be filed by any person that provides minimum essential coverage to an individual (1095-B) and by applicable large employers (Form 1096-C) who had on average at least 50 full-time equivalent employees during calendar year 2014 or small employers who are members of a controlled group that collectively had at least 50 FTEs and who offer an insured or self-insured plan or no group health plan at all. 

4.  Under new policies announced by the IRS, taxpayers may receive a letter when the service stops suspicious tax returns that have indications of involving identity theft but contain legitimate taxpayer’s name and/or Social Security number.  The IRS has agreed to reverse its policy and provide identity theft victims with copies of the fraudulent tax return that has been filed under their name by scammers so they can take the proper steps to secure their personal information. 

5.  The Trade Preferences Extension Act of 2015 contains a number of tax provisions in addition to its trade measures.  Taxpayers who exclude foreign earned income under Code Section 911 cannot claim the child tax credit, taxpayers must receive a payee statement (1098-T) before they can claim an American Opportunity, Hope or Lifetime Learning Credit or take the deduction for qualified tuition and related expenses.  This is effective for tax years after the TPEA’s date of enactment. 

6.  Under new rules proposed by the Obama administration, the Department of Labor would require most salaried workers earning less than $50,440 annually to be paid 1.5 times their normal pay for time worked beyond 40 hours.  This is slated to take effect, if passed, on Jan. 1, 2016.

The Kiplinger Letter—October 2, 2015—Notwithstanding current headwind, as shown in this week’s lackluster jobs for September, which had employers adding just 142,000 jobs.  We still see the economy gaining momentum through the fourth quarter and into next year. Paced by steady hiring in several sectors such as info tech, construction and health care, employment growth will rev up in 2016 with 200,000 or more new positions added each month on average. Not all sectors will be adding jobs, though.  Manufacturing and energy, in particular, will lag because of global economic woes, which hurt export. Job gains should up consumer spending which makes up more than two-thirds of U.S. GDP.  Economic growth will top 3% this quarter, thanks in large part to expected robust holiday sales. Next year, growth of 2.8%, the highest since 2005, follows a pickup of 2.5% for 2015.  El Nino figures to stave off much of the harsh winter weather that plagued the first quarters of this year and last which keep consumers holed up.  We see consumer-spending climbing at a 3% rate or better next year. In addition, more folks will flash the plastic, as they feel more secure financially. With unemployment levels near “full employment”, consumer confidence is at its highest since 2007. Inflation will not be much of a concern. Figure on 2-3% for next year vs 1.5% this year.  Energy prices will remain moderate overall. Business spending will climb modestly about 4%.The housing market will be healthy with more first-time buyers. Government spending will also increase but will not add too overall GDP growth.  Trade will actually detract from growth as imports far outpace exports.

The Kiplinger Letter—September 25, 2015—Even a brief government shutdown would ding some local economics that depend on federal spending.  The Federal Reserve.  We still look for the Fed to hike rates in December, ending the near-zero rates that have prevailed since 2008 and starting the process of taking interest rates back to prerecession levels. Failure to raise rates this year would undermine the Fed’s credibility. Financial markets should stay jumpy until interest rates rise. The Fed is also worrying about the housing market as it mulls higher rates. India’s thriving economy has the U.S. aiming to forge closer commercial ties. A major reason for courting India:  China whose economy is starting to slow even as Beijing adopts a more aggressive foreign policy.  Singapore and Malaysia are seeking warmer relations with the U.S. as well. Opportunities for American business abound in both countries.

By the Numbers (October 5, 2015 & September 21, 2015)

           Some Up, Most Down—80 individual stocks in the S&P 500 (i.e., 80 of 500 stocks or 16% of the stocks in the index) gained at least +10% during the first 9 months of 2015 (change of the stock price without factoring in the impact of dividends) including 20 stocks that are up at least +25% YTD through 9/30/15.  330 stocks (66% of the stocks in the index) have dropped in value since the end of 2014 (source:  BTN Research).

            Last Seven Weeks—The 5 worst performing trading days for the S&P during calendar year 2015 YTD have occurred since 8/20/15 (source:  BTN Research).

            Smaller Number—There are 7.915 million out-of-work Americans as of 9/30/15, the first time that the number of unemployed Americans has been less than 8 million since April 2008 (source:  Department of Labor).

            One Trillion Dollars Per Year—The national debt as of 9/30/05 was $7.933 trillion.  The national debt as of 9/30/15 was $18.151 trillion.  Thus, the national debt has increased $10.218 trillion over the last 10 fiscal years, i.e., fiscal years 2006-2015 (source:  Treasury Department).

The Treasury Department implemented a policy in early 2015 requiring that it maintain a daily cash balance of at least $150 billion in the government’s “checking account,” roughly equivalent to 15 days of average spending by Uncle Sam (source:  U.S. Treasury Secretary Jacob Lew).

            Cost of Doing Business—68% of the total employee cost that an employer pays in the private sector is for wages and salaries.  The other 32% is for the various benefits that are either legally required (e.g., Social Security) or are simply provided to attract and retain workers, including insurance, retirement plans and paid leave (source:  Department of Labor).

We again remind you that we are here to serve you.  Please make us aware of your needs so that can fulfill your wishes.  We hope the next 3 months will be kind to all of us in many ways.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Some information is obtained from "By The Numbers" and is copyrighted by Michael A. Higley.   Any opinions are those of Harriett MacDonald, CFP and Jeffrey Kirkman, AIF and not necessarily those of Sigma Financial Corporation or Sigma Planning Corporation. KM Financial is not affiliated with Sigma Financial Corporation or Sigma Planning Corporation. Past performance may not be indicative of future results.  This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.  Investments mentioned may not be suitable for all investors.  You should discuss any tax or legal matters with the appropriate professional.