• How Annuities React to Rising Interest Rates

    On March 16th, the Federal Reserve increased its federal funds rate from 0.25% to 0.50%, the first increase since 2018. This rate matters because it has a ripple effect on every aspect of consumers’ financial lives, from the annual percentage rate (APR) on credit cards to investment returns. While some investments, like bonds, react negatively to an increase in the benchmark interest rate, others thrive – like annuities. Keep in mind, there are hundreds if not thousands of annuities to choose from and they are not for everyone. Make sure to speak to your financial professional before considering adding an annuity to your portfolio.

    Different Types of Annuities

    • Fixed Annuity – The initial premium invested in a fixed annuity grows at a specific rate of interest for a specific time period. When the Federal Reserve raises its benchmark rate, the interest rate of fixed annuities typically follows suit, which results in better payouts for investors.

    • Fixed-Indexed Annuities – Similar to fixed annuities, this investment credits interest as well, however, the yield is calculated based on the performance of a market index, such as the S&P 500. When the interest rate environment inches up, like it is doing now, the growth potential of this investment increases. Akin to fixed annuities, there is no loss of principal – even when the market index it is following loses value.

    • Variable Annuities – These investments are more closely tied to equity markets because, traditionally, they hold contract assets in mutual-fund-like subaccounts. In this case, the operative term is “variable” because when equity markets fluctuate, so do the returns of variable annuities. Where the Fed Interest rate becomes important is if the contract owner adds, for a fee, a guaranteed living benefit rider that secures a separate income payout. Rising rates will give insurance companies more flexibility to increase payout rates on living benefits.

    What’s Next for the Fed?

    Federal Reserve policymakers will meet again in May to decide whether or not to increase the federal funds rate again. Since 2008, the rate has failed to get past 2.50% before tapering back down to zero. Prior to the Great Recession, the rate once approached 20 percent, as shown in the chart below.

    With inflation at its highest point in four decades (7.9%), the Federal Reserve is projecting to counter aggressively through seven total rate hikes this year that would reach 2.00%.

    If you are considering adding an annuity to your portfolio, an increasing interest rate environment should help bolster the balance sheets of the insurance companies who offer them, resulting in more competitive products with higher crediting rates.

  • Need to Know Tax Changes Before You File Your 2021 Tax Return

    This time of year, Americans are getting their financial lives in order and assessing the last fiscal year. Tax season can seem to be more complicated with every passing tax law and the last two years have added even more changes. Both 2020 and 2021 have come with modifications to the tax laws that have impacted some key components to filing your taxes. Tax season can be an uneasy time of year even without the added confusion from changes to the tax code, here are a few things that are different this year as you begin the process for tax year 2021.

    Don’t assume you’re in the same tax bracket as last year, income brackets have expanded. These changes were made to the tax code in 2020 prior to our current inflation worries, however the brackets have been increased to account for natural inflation as projected in October 2020. Be sure to check the updated ranges before you file to avoid any Tax Day surprises.

    Don’t assume you’re in the same tax bracket as last year, income brackets have expanded. These changes were made to the tax code in 2020 prior to our current inflation worries, however the brackets have been increased to account for natural inflation as projected in October 2020. Be sure to check the updated ranges before you file to avoid any Tax Day surprises.

    The Standard Deduction has increased for all filing categories, married filing joint, married filing separate, single or head of household. Each Standard Deduction has increased by $150 or $300 for married filing joint. The Standard Deduction is $12,550 for single filers and married filing separate, $18,800 for head of household filers and $25,100 for married couples filing jointly.

    Student Loan Forgiveness is no longer counted against you on your tax return. Starting for tax year 2021, loan cancellations for post-secondary education are no longer considered taxable income. This is a huge benefit to anyone in a high tax bracket with loan forgiveness.

    The Child Tax Credit was boosted to $3,000 per child aged 17 and under and $3600 for children five and under. There are eligibility rules and income thresholds so always best to speak with a tax professional to make sure you’re capturing the maximum benefits. 

    New in 2021 is also the ability to claim a charitable contribution deduction for each person in a filing arrangement. The rule was changed in 2020 to allow for a $300 deduction on top of the Standard Deduction. This year that rule was expanded further to $300 per person, so a married couple filing jointly can now deduct up to $600 for charitable contributions on top of the standard deduction.

    Many of these changes will lead to a different experience this year. Any questions about your tax filing situation are always best suited for a tax professional. For some additional information and a complete bracket breakdown please see the attached article;

    For some additional information and a complete bracket breakdown please see the attached article; https://www.yahoo.com/video/7-tax-changes-know-filing-233000743.html#:~:text=Higher%20standard%20deductions&text=For%20the%202021%20tax%20year%2C%20the%20standard%20deduction%20is%20getting,(up%20%24300%20from%202020)

  • History Shows Stock Gains Can Add Up After Big Declines

    What goes up must come down, a basic law of physics that investors forget when the stock market is crashing. The opposite is most certainly also true, what goes down will come back up. If you have lived through a stock market correction, then you may already know this to be true. Remain steadfast in your investment strategy to put yourself in the best position to capture the recovery. 

    It is during a market pullback that people forget the rebound will repeatedly exceed the fall. The issue is certainty, if you knew for certain you would get ten dollars in the future for spending five dollars today it is easy to spend the money upfront. The difference in terms of the stock market is there is an element of uncertainty with any investment. Historical analysis proves time and time again that the rebound will exceed the fall. However more often an investor will make an irrational decision driven by fear, leading to panic selling in search of a more certain outcome. As the chart will explain, if you have the patience to wait out a crash, there is evidence to suggest you will be rewarded in the years following.  

                   No one has a perfect understanding of the future and what will happen, but we can use the information illustrated by history and the concepts of the market cycle to assume there is a higher probability of positive outcomes following a market correction. According to the piece published by Dimensional Funds, following a 10%, 20%, and 30% market decline, the following 1 year, 3 year, and 5 year average cumulative returns have tended to be positive. When the market pulls back, the years following tend to have positive cumulative returns.

    There are always periods of time that could be outliers to this idea however the data shows the longer the period invested the better the potential for positive returns. Patience is still a long-term drive of investor success. Those who have stayed invested the longest, tend to have the best returns. After a decline, the average cumulative return is by far the greatest after 5 years. As the article points out, each downturn event 10%, 20% and 30% all show over 50% cumulative returns in the subsequent 5-year period. Past performance is not indicative of future returns. Past performance is a representation of how the event played out at one time which can be used to assume the outcome of similar events in the future.

  • Monthly Newsletter

    Quick and Impactful Financial Insights – January 2022

    Important Dates:

    • Jan 1st: New Years Day
    • Jan 1st Social Security & Medicare Changes Changes Kick In
    • Jan 15th: Fourth Quarter 2021 Estimated Tax Payments are due
    • January 17th: Martin Luther King, Jr Day – (Stock Market Closed)

    It’s a new year which means a fresh start and plenty of things to be excited about.  Financially 2021 ended with the same dull tone it carried most of the year.  Here’s a quick recap: inflation is scary, interest rates will rise in 2022, and lots of talk of tax law change but nothing moved in Washington.  This month Lane Hipple shares the optimism of a new year and the excitement we get from impacting lives through proactive planning.

    We start this month’s reading with confirmation that financial planning impacts quality of life and increases happiness.  We move into trends the industry see taking a forefront in 2022 and explore the current supply chain constraints.  We wrap up with a view into the future and how retirement and aging will be very different as technology helps us live longer fuller lives.  

    The Lane Hipple team would like to thank you for making 2021 another successful year.  We wish you a healthy, happy and successful 2022, Happy New Year, Enjoy this month’s reading! 


    1. Financial Planning Means Happiness
    2. 6 Financial Planning Trends for 2022
    3. Why Are Supply Chains Blocked?
    4. 5 Ways Technology Will Change How You Age

    Financial Planning Means Happiness

    There are many reasons why people hire financial advisors, beneath all them is a desire for contentment and happiness.  Well according to a new study, hiring a financial advisor actually is associated with being happier.  Whether it’s the confidence in your financial decisions, the surety you are on track for your goals or relief from financial stresses, having a trusted partner for your financial life decisions will make for a happier journey.  Lane Hipple is proud to be your planning firm and deliver happiness. We have ambitions to help more families in 2022, and welcome the opportunity to talk with those you know and care about that so we can spread the joy!


    6 Financial Planning Trends in 2022

    Entering a new year gives us the opportunity to step back, reflect on the past year and contemplate the year ahead.  We think about what we could face in 2022; tax and regulation change, market volatility, inflation, rapid retirement of workforce, evolving client communication and rethinking the work/life harmony.  As we address clients’ financial plans for the years ahead, the Lane Hipple team is always exploring planning strategies and expanding our knowledge to deliver the best service to our clients.  This article highlights some of the trends that investors and clients may face in 2022


    Why Are Supply Chains Blocked?

    The pandemic has created an enormous amount of pressure on people, businesses and institutions; like hospitals, schools..just about everyone and everything.  One thing is becoming abundantly clear, global supply networks have collapsed just as the recovery momentum was swelling. Like a Philadelphia sports team leading up the playoffs, the global supply chain cannot handle the pressure.  Surging demand is leading to the shortages, but numerous disruptions and delays are leading to prolonged issues.  Read more about the complex supply chain and the dynamic issues that the global economy will have to overcome to move past this imbalance in supply and demand.


    5 Ways Technology Will Change How You Age

    Technology enhances our daily lives in countless ways, and advances are moving at an accelerated pace.  Have you considered how this evolution will effect human life in the future, like how we age.  The potential to significantly impact how we age is monumental, going far beyond just longer life expectancy.  Technology will affect our quality of life, mobility, socialization, health monitoring and where we age.  Learn about how technology will enable us to live fuller lives as we age.


    Enjoy the Lite Reading and Remember
    “An Investment in Knowledge Pays the Best Interest” ~ Benjamin Franklin

  • Best End of Year Tax Strategies 2021

    Tax topics to address for the end of the year 2021

    One of the most overlooked areas of financial planning remains income & wealth tax planning, and I mean forward looking problem solving planning that address clients current tax situation, their future tax obligations and the ever changing tax environment. The last five years have been monumental for tax planning and having a financial planning team that understands importance of navigating the complex tax environment is more crucial than ever. In a very short period of time we have seen significant tax changes from the Tax Cuts and Jobs Act (TCJA) of 2017; The Setting Every Community Up for Retirement Enhancement (SECURE) Act; The Coronavirus Aid, Relief, and Economic Security (CARES) Act; the Consolidated Appropriations Act; and the American Rescue Plan of 2021. If that doesn’t have your head spinning we are on the brink of another major tax overhaul pending the passing of the Build Back Better Act, Spending Plan and Infrastructure Bill. All of these have made an already confusing tax system mindbogglingly complex, however we are helping clients navigate and plan with sound tax planning strategies. Below is a great resource about potential year end strategies for tax leverage, savings and creating generational wealth.