2020 Market Update: Reversal of Sentiment

After making a bunch of gloom-and-doom predictions about the
markets in 2019, with fears of a pending recession, Wall Street money managers
have a considerably more brightened outlook for 2020. Indeed, recent indicators
have heightened expectations for U.S. economic growth this year.

For example, the Conference Board is predicting a 2.1% rise
in the gross domestic product (GDP) in 2020, commenting, “We believe the worst
of the slowdown is behind us.” 1 The real estate market also is showing
promise: Demand for homes is up, fueling growth in new construction, which
could boost home prices. 2

The markets appear to be agreeing with these forecasts, with
the Dow and the S&P 500 starting the new year with strong performances.
Some managers are projecting that the long-running bull market could take stock
prices even higher this year.3

With this in mind, don’t forget to take advantage of
increased retirement contribution limits for 401(k) plans, 403(b) plans, most
457 plans, Thrift Savings Plans, profit-sharing plans and cash balance pension
plans this year — up by another $500 to $19,500. For people over age 50, the
catch-up contribution for their 401(k) plans also increased by $500, which
means you can save up to $26,000 in your employer plan.4

Remember, too, that if you continue to work past traditional
retirement age, new legislation is designed to help you save and invest longer.
The new SECURE Act, passed at the end of last year, delays the age to start
drawing required minimum distributions (RMDs) from retirement accounts from 70 ½
to 72 for those who turn 70 ½ after 2019. Also, you may continue contributing
to a traditional IRA as long as you earn income, as the age cap has been

These new changes could play a role in determining when you
want to set your retirement date. Some people who don’t need the money may want
to keep earning a paycheck, even on a part-time basis, just to keep
contributing to their investments. Also, if you delay starting Social Security
benefits until age 70, you can just about double the amount you draw compared
to starting them when you’re first eligible (age 62).6 If you’d like
to assess retirement planning strategies for this year, we’d be happy to discuss
your portfolio and financial strategy with you.

Content prepared by Kara Stefan

1 The Conference Board. Jan. 8, 2020. “The Conference
Board Economic Forecast for the U.S. Economy.” https://www.conference-board.org/data/usforecast.cfm. Accessed Jan. 29, 2020.

2 Michelle Meyer. Bank of America Global Research. Nov.
22, 2019. “U.S. Economic Forecast: Clouds, Sunshine or Showers?” https://mlaem.fs.ml.com/content/dam/ML/pdfs/Transcript_Meyer_Outlook_2020.pdf. Accessed Jan. 17, 2020.

3 Knowledge@Wharton. Jan. 7, 2020. “What Investors Need
to Watch for in 2020.” https://knowledge.wharton.upenn.edu/article/what-investors-need-to-watch-for-in-2020/. Accessed Jan. 17, 2020.

4 David Rae. Forbes. Nov. 20, 2019. “Great News From
The IRS For Retirement Savers.” https://www.forbes.com/sites/davidrae/2019/11/20/irs-retirement-savers/#7aa47397384a. Accessed Jan. 29, 2020.

5 Roger Young. T. Rowe Price. Dec. 24, 2019. “The
SECURE Act: What Investors Need to Know.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/retirement-planning/the-secure-act–what-investors-need-to-know.html. Accessed Jan. 17, 2020.

6 Judith Ward. T. Rowe Price. Jan. 7, 2020. “2020 Key
Financial Numbers.” https://www.troweprice.com/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/personal-finance/key-financial-numbers.html. Accessed Jan. 17, 2020.

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