Bank Issues and Financial Management

Some banks recently faced challenges, which you might be aware of. A few medium-sized banks catering mostly to wealthy investors, hedge fund managers, crypto enthusiasts, start-up companies, and affluent individuals experienced issues with their bond portfolios. These portfolios took a hit due to the recent aggressive rate increases by the Fed. As a result, when some significant depositors wanted to withdraw their money, the banks couldn’t provide the funds, leading the government to step in.

This situation underscores the importance of diversifying your investments and not relying solely on banks. It’s crucial to have your money in various places, such as multiple banks, insurance companies, fixed and fixed index annuities, gold/silver, real estate, rentals, small businesses, collectibles, and the market itself.

Remember, banks don’t have a lot of physical cash on hand; most of it is digital. If many people went to the same bank requesting substantial amounts of their own money, the bank might not be able to provide it. Hence, it’s essential to work with a Certified Financial Planner Professional™ and Investment Fiduciary, especially in these uncertain times.

P.S. After tax season, remember that I offer a $90 full tax preparation service for clients with investments in my managed stock and bond portfolios. It’s beneficial to have your CFP™ in sync with your CPA.

How Taxes Work on Social Security

Social Security income is subject to taxation, but the tax burden isn’t a straightforward gross income tax. Several unique factors determine your tax rate and overall tax liability:

• Not all Social Security income is taxed. Only a portion of your benefits might be subject to tax, depending on your taxable and overall supplemental income and filing status.
• The amount of your Social Security benefits that are taxable is determined by the “combined income” formula. This formula takes into account your adjusted gross income, tax-exempt interest, and half of your Social Security benefits.
• If your combined income is below a certain threshold, none of your benefits will be taxed. If it exceeds the threshold, a portion of your benefits may be taxed at either 50% or 85%.
• For single filers, the threshold for the 50% tax rate is $25,000, and for the 85% tax rate, it’s $34,000. For married couples filing jointly, the thresholds are $32,000 and $44,000, respectively. For married individuals filing separately, the thresholds are $25,000 and $34,000.
• The combined income formula is for federal taxes. Some states also tax Social Security benefits, but the rules vary. In some states, all Social Security benefits are exempt from state tax, while in others, the same combined income formula used for federal taxes is applied.

Until next month, Wayne