Missoula financial advisors concerned with rising US debt due to federal spending, tax cuts
At least two financial experts in
They also believe the rise of computer algorithm-based stock market trading and the Trump administration’s trade wars have contributed to the recent volatility and large sell-offs that have spooked analysts and investors.
Banna said most people don't realize how much they stand to lose. He also believes that America’s deepening debt is going to necessitate higher taxes in the future, so he’s trying to spread the word that people should structure their assets to reduce their tax liability down the road.
“I can tell you in all my years of finance planning and investment management, I bet you at least 90 percent, if not more of my new clients, the risk they have in their portfolio does not match the risk they’re willing to tolerate,” he said. “It’s always higher" in their portfolio.
Banna teaches free two-night financial advising and retirement planning classes at
“Creating a retirement plan for people, I feel, is a critical exercise everyone needs to do,” he said.
“I am trying to get people to understand that one of our biggest risks in retirement is going to be taxes going up,” he said. “There are only three ways to solve this problem: Raise revenue [by increasing individual income taxes] or cut expenses [by cutting the benefits paid out by
Banna said he’s looked at the
“If you took all our assets including revenue projections from
He said it’s not going to surprise him if the costs of Medicare go up in the next couple of decades.
“By 2034 there’s only going to be enough revenue in the
Under current law, tax rates will go up in 2026 back to 2017 tax rates, because the current tax reform laws will sunset in 2025. Because he believes that in the next eight years taxes will go up to levels that existed before the Tax Cuts and Jobs Act of 2017, Banna feels right now is a good time to convert tax-deferred assets such as a IRA to a tax-free asset such as a Roth IRA.
“There are strategies to mitigate these things,” he said.
“From my perspective, taxes almost certainly have to go up,” he said. “You have to be able to generate revenues. That can happen by increasing taxes or the economy is so strong that the GDP [Gross Domestic Product] is producing enough to pay down the deficit. That second scenario is appearing not likely to happen. We may be headed for an economic slowdown. So because taxes were cut, you’ve got to spend less. That’s not happening both on a government level or a personal level.”
Schmautz said he doesn’t believe the Tax Cuts and Jobs Act will create enough economic growth to “pay for itself” as many
“If it doesn’t spur a lot of increased economic growth, and it doesn’t seem like it is, at some point we’ll be faced with higher taxes somehow,” he said. “It’s probably not going to be as blatant as the tax rate going up, but it will be less visible, like less deductions. And the second piece of that is
The recent volatility in the stock market has spooked investors, and Banna believes more choppy waters lie ahead.
“I do feel like it’s different from before,” he said of the tumble the Dow Jones Industrial Average and other stock indicators took in December. “We have some unique things going on. One of those is the markets have become very tied globally into computer-based technology. Since 1896, out of the top 10 one-day drops for the
He also said that many people don’t realize that
Schmautz agreed that Trump’s tariffs, and the ensuing trade retaliations by foreign countries, are causing market jitters. Coupled with rising interest rates and slowdowns in other countries, many investors are finding reasons to get out of the market rather than get in. Schmautz also agreed that computer-based trading has exacerbated the volatility.
“Sometimes, these big swings have a lot of drive behind them from computerized trading, those algorithms that, if you hit a certain point on a stock or index, they sell,” he said. “And it goes a little lower and it says sell some more. The volatility gets amplified by computer trading, and I suspect that will go on.”
Still, Schmautz said this year’s wild swings aren’t historically huge, percentage-wise, compared to other big drops like 2011 or 2000 or 1987. Besides, he said, now might be a good time to buy.
“Warren Buffet says that’s the time of opportunity, to get greedy when others are fearful,” he said. “Hopefully, that’s what people are able to do is step back and put this in a long-term perspective. Is it so bad? Not yet.”
Banna's free classes on retirement risks and solutions at
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