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Weekly Market Commentary

Changes to RMDs in 2022: What You Need to Know
There are changes to Required Minimum Distributions (RMDs) that you need to be aware of for 2022. RMD ages have changed and now the RMD tables are changing along with the new later RMD age of 72. Here are noteworthy changes about how you may be impacted in 2022.

RMD Distributions
Under The SECURE Act, if you turned age 70 1/2 in 2019, you would've been required to take your first RMD by April 1, 2020. If you turned age 70 1/2 in 2020 or later, you should have taken your first RMD by April 1 of the year after you turned age 72. This rule generally applies to the age of the original owner of a traditional IRA, SIMPLE IRA, SEP IRA, a 401(k) or 403(b). Roth IRAs do not have RMDs.
RMD tables are changing in 2022.
Since the RMD tables haven't been updated since the early 2000s and people now have longer life expectancies, the tables are due for an update. For example, assuming a prior year end IRA balance of $100,000, the old life expectancy factor of 24.7 results in a RMD of $4,048.59, while the new life expectancy factor of 26.5 results in an RMD of $3,773.59 – a $275 difference, which stays in the IRA to continue to potentially grow tax deferred. Here are a few things to note about the new 2022 RMD tables:
  • Starting in 2022, RMD amounts will be smaller to extend the balance over a longer period.
  • A smaller RMD means fewer taxes to pay.
  • More money in retirement savings accounts can result in more tax-deferred accumulation through reinvesting.
  • RMDs are now at a lesser percentage.
  • The new RMD tables help investors to manage their taxable income better.
What else should you know about 2021 RMDs and the new 2022 RMD tables?
Investors over age 72 can't use the new RMD tables until 2022 which means that you will need to use the current RMD tables to calculate your 2021 RMD. The confusing result of the new laws and IRS changes is that there are now different RMD rules and tables for 2021 and 2022.
Let’s Team Up
If you are over age 72, now is a great time to meet with our office to ensure you've scheduled your RMD for 2021, and plan for 2022's RMD based on your life expectancy and the new 2022 tables.
U.S. equities moved lower this week as indicated by the S&P 500 which was down -5.67% on the week. In the U.S., smaller-sized companies underperformed their larger-sized counterparts, as the Russell 2000 index decreased by -8.07% on the week. International stocks as measured by the MSCI EAFE were negative on the week, down -2.08%, outperforming domestic stocks. Emerging market stocks were down on the week with the MSCI EM decreasing -1.04%. U.S. investment-grade bonds were positive last week with the Bloomberg Barclays U.S. Aggregate Bond index up +0.05%.

STOCK CORRECTION - After closing at an all-time high of 16,057 on 11/19/2021, the NASDAQ Composite index has fallen 14.2% (total return) over the next 2 months to close at 13,769 on Friday 1/21/2022. The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system (source: NASDAQ).
UP/DOWN - The S&P 500 index has been up 40 of the last 50 years, i.e., 1972-2021, gaining an average of +11.1% per year (total return). The stock index has produced an average annual gain of +18.8% (total return) during the 40 “up” years while losing an average of 14.8% per year (total return) during the 10 “down” years. The S&P 500 is down 7.7% YTD (total return) through Friday 1/21/2022. The S&P 500 consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research).
WHICH SHOULD YOU FOLLOW? - As of 12/31/2021, the S&P 500 represents 79% of the stock market capitalization of the entire US stock market, i.e., $42.4 trillion of $53.4 trillion. As of 12/31/2021, the 30 stocks that make up the Dow Jones Industrial Average represents just 22% of the stock market capitalization of the entire US stock market, i.e., $12.0 trillion of $53.4 trillion (source: BTN Research).

A MILLION LESS - In the fall of 2019 (pre-pandemic), 15.47 million undergraduates were enrolled in college. In the fall of 2021, 14.44 million undergraduates were enrolled (source: Nat’l Student Clearinghouse Research Ctr.).
Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Advisor Group Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Advisor Group or its affiliates.

Certain information may be based on information received from sources the Advisor Group Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Advisor Group Research Team only as of the date of this document and are subject to change without notice. Advisor Group has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Advisor Group is not soliciting or recommending any action based on any information in this document.

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