Volume 91 No. 1 - January 2020
Review of 2019, Outlook for 2020
Last year started with a stock market correction. By year-end, however, our continued over-weighting in stocks benefited our clients’ portfolios and produced market returns that exceeded even our most optimistic expectations. As we indicated a few months ago, we have reviewed our portfolios and are taking some risk off the table. Although the economy and stock market continue to perform well, it’s prudent to recognize that no boom time lasts forever and that this is the time to become more conservative in our stock selection. Selectively, we are reducing stock allocations that grew with the market’s advance in 2019. We have also reviewed each stock held against this more cautious outlook. While we prepare for more normal stock market returns, we hope that the markets continue to exceed our more conservative expectations.
Charles Schwab’s Acquisition of Ameritrade
In late November, Charles Schwab announced its purchase of TD Ameritrade. Internally, the definitive agreement between the firms meant a lot of internal discussions in both companies around the upcoming integration, which is expected to close in late 2020. The deal is still pending regulatory approvals as well as approvals from stockholders of both firms. Under the agreement, TD Ameritrade will merge with Charles Schwab. The combined entity will operate under the Charles Schwab name.
What does this mean for the clients of Investment Counsel?
Our primary custodian for our accounts has been TD Ameritrade. After the purchase transaction is complete, TD Ameritrade will combine with Charles Schwab and adopt their brand. Although the integration plan is not complete, communications from TD Ameritrade indicate that the new combined entity will identify and adopt the best capabilities each firm has to offer.
For now, though, TD Ameritrade and Charles Schwab remain separate entities until all regulatory approvals are obtained and the transaction closes. The transaction is expected to close in the latter half of 2020, with the post-close integration expected to take up to three years from that date.
What should I do?
No action is required on your part. As Investment Counsel receives news and information regarding this transition to Charles Schwab, we will keep you informed. As always, if you have questions about this change, please call us or stop by the office. We’ll be happy to address your concerns and make this change as transparent as possible.
How Retirement is Changing in 2020
With the deluge of coverage that the impeachment received last month, you may have missed that Washington made some progress for Americans: the passage of the SECURE Act. Included within the $1.4 trillion spending package that funds the federal government through September (and prevents a government shutdown), the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) aims to make retirement more secure for Americans through a variety of measures.
Signed into law on December 20 and taking effect on January 1, the major changes introduced by the SECURE Act are:
Required Minimum Distributions (RMDs) now start at 72. Those who turn 70½ in 2020 may now wait until age 72 to withdraw from their traditional IRAs. Please note that those who turned 70½ before 2020 still need to take or continue taking RMDs. The change applies only to those who turn 70½ in 2020 or later.
IRA contributions are allowed, past age 70½. If a person has earned income in the year they turn 70½ and beyond, that person may make contributions to a traditional IRA, starting in 2020. However, if they are over 70½, no 2019 (prior-year) traditional IRA contributions are allowed.
New rules for inherited retirement accounts. Beginning in 2020, if an account holder of a retirement account dies, the distributions from that account to beneficiaries must occur within ten years. Exceptions may apply for spouses, minor children, and disabled individuals.
Retirement accounts may be used to fund adoptions and birth expenses. Expenses related to adoption and birth may now be covered by penalty-free withdrawals, subject to certain limits.
Businesses now receive a tax credit for offering retirement account auto-enrollment. Businesses offering auto-enrollment into their retirement plans will receive a tax credit in addition to the tax credits they already receive. Research has shown that employees are more likely to save for retirement using a plan they’re in, rather than one in which they have to enroll.
The SECURE Act contains many provisions and changes retirement funding as we have known it. If you have any questions about the changes introduced by the SECURE Act, IRAs, or retirement accounts, please let us know and we will be happy to answer your questions.
Inside the Office: ICI’s New Web Presence
One of our goals as we entered this new decade was to update our website and make it easier to navigate and more user-friendly. Today, we’re happy to announce the launch of our newly designed website: http://www.ici1929.com/ After months of recording videos, testing out various designs, and polishing our copy, we’ve arrived. Investment Counsel’s new web presence home will launch within the next few weeks.
On our new website, you’ll find useful information regarding who we are and what we do. You’ll also find a series of informational videos recorded by Chris, which cover: our investment approach, security selection process, investment strategy, generational planning, and our newsletter.
As always, if you have questions, feedback, or comments on the new site, please let us know.
Investment Counsel Inc. is a registered investment adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.