Financial Intel Monthly

The Markets (third quarter through September 30, 2020)

Before reviewing your company 401(k) plan, check how the market in quarter 3 can affect your retirement. July kicked off the third quarter with a bang as stocks surged throughout much of the month. Investors were encouraged by solid employment growth, a rise in personal income and consumer spending, a surge in the housing sector in your area, and an increase in industrial production. All news was not positive, however. The second-quarter gross domestic product fell more than 31% and many states saw an increase in the number of reported COVID-19 cases. Nevertheless, investors stayed with equities, pushing values higher for the fourth consecutive month. Tech stocks drove the Nasdaq to a 6.8% gain, followed by the S&P 500 (5.5%), the Global Dow (3.5%), the small caps of the Russell 2000 (2.7%), and the Dow (2.4%). Treasury bond prices climbed, sending yields lower in July. Crude oil prices settled at $40.40 per barrel, nearly $1.00 ahead of their June closing values. Gold prices closed July at $1,990.00, about 11% higher than June's closing price.

On September 30, 2021, Congress averted a potential federal government shutdown by passing a continuing resolution to provide funding for government operations through December 3, 2021.[1] This was only a temporary measure, and lawmakers will continue to wrestle with the budget for fiscal year 2022, as well as the debt ceiling, which requires action by mid-October.

Both of these issues have become increasingly contentious over the past decade, and they are made especially difficult this year due to simultaneous negotiations on two large spending initiatives, the roughly $1 trillion infrastructure bill, which has bipartisan support, and the $3.5 trillion budget package funding education, climate initiatives, and health care, which is split along party lines.

This article is pertinent to all age groups, however those entering theirRetirement Years will find the information particularly important. Has my house been stolen? Could I be evicted? Is all my equity taken?

Sounds like you’ve just heard one of the many TV and radio ads about home title theft.

Yes! They’re everywhere. It must be a major problem.

Hold on just a second. You can’t believe everything in an ad, especially when it uses fear to promote a product.

On Saturday, September 25, 2021, the House Budget Committee voted to advance a $3.5 trillion spending package to the House floor for debate. The House Ways and Means Committee and the Joint Committee on Taxation had previously released summaries of proposed tax changes intended to help fund the spending package. Many of these provisions focus specifically on businesses and high-income households.

Expect these proposals to be modified; some will likely be removed and others added as the legislative process continues. As we monitor progression through the legislative process, though, here are some highlights from the previously released proposed provisions worth noting.

Two large infrastructure bills have taken important steps to advance in Congress. Here's where they stand:

1. On August 10, 2021, the Senate passed a $1.2 trillion bipartisan infrastructure bill, to be named the Infrastructure Investment and Jobs Act when enacted. A vote on this bill is expected in the House no later than September 27.

Interest rates are tending upward, if this trend continues it will decrease the value of ExxonMobil employees' pension lump-sums. The IRS has recently released the Segment rates for the month of August, recorded at: 0.66% / 2.50% / 3.12%. Over the course of 2021, interest rates at ExxonMobil increased significantly, which greatly reduced many lump sum payments. With record low rates culminating in the first quarter of 2021, ExxonMobil employees have since seen a significant increase in interest rates. We saw an increase in rates for the second & third quarters of 2021 in the second segment, and now fourth quarter rates have risen slightly higher. Rates rose roughly 0.04% in the second segment, in the last quarter. The short term rates have experienced a slight increase, while the long term rates saw a slight decrease. Even though blended rates for the first quarter of 2022 will not be known until the end of September, this recent trend upward might be an early indicator of bad news for ExxonMobil employees opting for a lump-sum.

What AT&T Employees May Not Know About HSAs

With all of the recent changes in Texas this is particularly relevant to Texas residents. Regardless of whether they are insured or not, many Americans report that some of the largest recurring expenses throughout their lifetimes come in the form of health care costs. Many AT&T employees from areas like California can become better prepared for expected and unexpected medical expenses, with a Health Savings Account (HSA).

October is the kickoff season for financial aid. That's when incoming and returning college students can start filing the Free Application for Federal Student Aid, or FAFSA, for the next academic year. The FAFSA is a prerequisite for federal student loans, grants, and work-study, and may be required by colleges before they distribute their own institutional aid to students.

How do I submit the FAFSA?
The FAFSA for the 2022-2023 school year opens on October 1, 2021. Here are some tips for filing it.

• The fastest and easiest way to submit the FAFSA is online at studentaid.gov. The site contains resources and tools to help you complete the form, including a list of the documents and information you'll need to file it. The online FAFSA allows your tax data to be directly imported from the IRS, which speeds up the overall process and reduces errors.
  
  
• Before you file the FAFSA online, you and your child will each need to obtain an FSA ID (federal student aid ID), which you can also do online by following the instructions. (Once you have an FSA ID, you can use the same one each year.)
  
  
• The FAFSA can also be filed in paper form. But it will take much longer for the government to process it.
  
  
• You don't need to complete the FAFSA by October 1. But it's a good idea to file it as early as possible in the fall because some federal aid programs operate on a first-come, first-served basis. Colleges typically have a priority filing date for both incoming and returning students; the priority filing date can be found in the financial aid section of a college's website. You should submit the FAFSA before that date.
  
  
• Students must submit the FAFSA every year to be eligible for financial aid (along with any other college-specific financial aid form that may be required, such as the CSS Profile). Any colleges you list on the FAFSA will also get a copy of the report.
  
  
• There is no cost to submit the FAFSA.

How does the FAFSA calculate financial need?
The FAFSA looks at a family's income, assets, and household information (for example, family size) to calculate what a family can afford to pay. This figure is known as the EFC, or expected family contribution. All financial aid packages are built around this number.

Tip: Starting with the 2023-2024 FAFSA (which will be available next year starting October 1, 2022), the EFC will be renamed the SAI, or student aid index.

When counting income, the FAFSA uses information in your tax return from two years earlier. This year is often referred to as the "base year" or the "prior-prior year." For example, the 2022-2023 FAFSA will use income information in your 2020 tax return, so 2020 would be the base year or prior-prior year.

When counting assets, the FAFSA uses the current value of your and your child's assets. Some assets are not counted and do not need to be listed on the FAFSA. These include home equity in a primary residence, retirement accounts (e.g., 401k, IRA), annuities, and cash-value life insurance. Student assets are weighted more heavily than parent assets; students must contribute 20% of their assets vs. 5.6% for parents.

Your EFC remains constant, no matter which college your child attends. The difference between your EFC and a college's cost of attendance equals your child's financial need. Your child's financial need will be different at every school.

After your EFC is calculated, the financial aid administrator at your child's school will attempt to craft an aid package to meet your child's financial need by offering a combination of loans, grants, scholarships, and work-study. Keep in mind that colleges are not obligated to meet 100% of your child's financial need. If they don't, you are responsible for paying the difference. Colleges often advertise on their website and brochures whether they meet "100% of demonstrated need."

Should I file the FAFSA even if my child is unlikely to qualify for aid since I work at a Fortune 500 Company?
Yes, probably. There are two good reasons to submit the FAFSA even if you don't expect your child to qualify for need-based aid.

First, all students attending college at least half-time are eligible for unsubsidized federal student loans, regardless of financial need or income level. ("Unsubsidized" means the borrower, rather than the federal government, pays the interest that accrues during school and during the grace period and any deferment periods after graduation.) If you want your child to be eligible for this federal loan, you'll need to submit the FAFSA. But don't worry, your child won't be locked in to taking out the loan. If you submit the FAFSA and then decide your child doesn't need the student loan, your child can decline it through the college's financial aid portal before the start of the school year.

Second, colleges typically require the FAFSA when distributing their own need-based aid, and in some cases as a prerequisite for merit aid. So filing the FAFSA can give your child the broadest opportunity to be eligible for college-based aid. Similarly, many private scholarship sources may want to see the results of the FAFSA.

The U.S. housing market, already strong before the pandemic, has heated up to record levels in 2021. The Case-Shiller U.S. National Home Price Index, which measures home prices in 20 major metropolitan areas, reported a 12-month increase of 18.6% in June 2021, the largest year-over-year gain in data going back to 1987.[1]