From an investment standpoint, 2018 will likely be remembered as the year when nothing seemed to work. Despite efforts to build well-balanced portfolios and minimize risk, it was tough to find safe zones – every investment category seemed to feel some degree of pain. It didn’t matter that in prior years, investors were often rewarded with over-expected returns. That’s because in today’s fast-paced, Twitter driven world, our opinions and attitudes change as quickly as a Facebook post.
So, let’s look ahead – a little further than the six o’clock news. 2019 offers a chance for renewal and re-positioning; and that means a revisit of your total financial plan – not just your investments. With interest rates higher, a new tax law in place and a potential change in the real estate market, investors must make certain that their overall financial plan is well-positioned for the years to come.
Here are a few items to consider…
In December of 2017, the Tax Cuts and Jobs Act was signed into law resulting in one of the biggest tax law overhauls since 1986. While changes to the tax law were instituted for tax year 2018, many people might not know the complete impact of the changes until taxes are due on April 15, 2019. Speak with your accountant to discuss how these changes will impact your tax return for 2019 and beyond.
Rising Interest Rates
Over the course of 2018 the Fed has continued their path to normalizing interest rates by increasing rates by 0.25% four times, for a total of a 1% increase in short term rates. This move should move mortgage, savings account, money market and CD rates higher, however, not everyone is feeling the effects of the increased rates on their bank accounts! While many banks are advertising higher interest rates, most will not increase an account’s interest rates unless asked. With banks offering upwards of 2% on new money markets and savings accounts, now is a great time to shop around and see if there are better rates available.
You can browse the best available savings, money market and CD rates at bankrate.com.
Rising Home Prices
The average price of a single family home sold in Massachusetts rose to an all-time high of $605,000 in October, 2018. This represented a 7.1% increase from just last year! A reversal is possible in 2019-2020.
Rising interest rates will likely make the cost of mortgages more expensive. Thus, the pool of candidates eligible to buy your home could shrink. Sellers seeking to attract more buyers may be forced to lower their home price. A situation that hasn’t happened for years.
But in the short term, homeowners who have seen their property values rise may be faced with higher property taxes. And higher property values could mean increasing the coverage of your homeowner’s insurance. It may be time to revisit with your insurance agent and make sure you still have the proper coverage.
You can find estimates for how much your home may be worth on websites like Zillow.com or Redfin.com which aggregate local sales data to provide an estimate of your home’s current value.
January is a time for new resolutions. I’d encourage you to start the year a commitment to revisiting your entire financial plan. Make sure you know where everything is, what everything is worth, and how every element of your financial life integrates with one another. After all, delivering financial and investment advice to individuals and families is what we’ve done for more than 50 years. If you’re feeling uncertain, give our office a call. We’re here to help.
Related Content: Tax Reform: Historic Tax Bill Signed into Law
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