The Chinese have a 12-year zodiac cycle calendar. Each year coordinates with a different animal. Last year was year of the Tiger and 2023 is year of the Rabbit.
We will call 2023 Year of the Recession. If you read the financial news, it is not too rosy.
According to a poll from Gallup, 79% of Americans think 2023 will be difficult, 65% of people think prices of goods and services will rise exponentially and 81% think taxes will be higher this year. Jamie Dimon CEO JPMorgan (our country’s largest bank) said in his annual letter to shareholders, that “the US will enter a “bad recession” like 2008.” JP Morgan is preparing for economic growth to plunge as much as 35%.
According to Forbes article “Bank of America Becomes Latest Financial Institution to Forecast Recession”, this sentiment is also shared by Bank of America, Deutsche Bank, Goldman Sachs and Japanese Investment bank Nomura.
There are several changes that will have an effect on the economy in 2023.
1. The congress did not clear the R&D credits. (Reducing important incentives that companies need to be encouraged to commit to Research & Development.)
2. Congress through the Inflation Reduction Act added taxes on oil production. (I guess gas prices weren’t high enough.)
3. Stock buy backs now have a tax to discourage their use. (Stock Buy-Backs can help support stock prices. We see this as a long-term negative to stocks)
4. Loan repayments -December 2022 began payments for businesses who borrowed money from the SBA in 2020. $348.8 billion was loaned. This represents additional business costs just as the economy is starting to slow.
5. Child tax credits are being reduced for 2023 which will increase taxes on the middle class.
6. Inflation and Interest rates are continuing higher, discouraging borrowing and increasing costs to businesses and consumers.
7. Housing (existing home sales and housing market indexes) by most measures have dropped over 30% last year.
2022 ended with the S&P 500 index down -19.57% (including dividends). The technology laden NASDAQ lost -32.97% for 2022. Historically, January-February following a negative year can see an average loss of -3.34%. We think another -20% drop is likely for 2023. Bonds lost between -4% to 33% last year3. Which was a shock. Frankly, we are quite proud of our last year’s portfolios performance.
What to do? The buy and hold guys say to stay calm and carry on. That is just lovely until you get hit in the face with market losses that take 10 to 15 years to recover4. Not good if you are approaching or in, retirement. Many investors see stock market declines as a chance to invest in last cycle ‘hot stocks.’ In my 24 years of experience, that is a mistake. We believe that this market has turned. Your strategy should adapt. We recommend an income dividend portfolio for your market-based investments and doing a retirement risk review to see if you are allocated properly.
Social Security Hacks
Social Security Appeal Hearing Success!
In 2020, I took coursework and passed a proctored exam to earn the designation as Registered Social Security Analyst or RSSA. My purpose in earning the letters RSSA was to encourage folks to come to my Social Security Educational events. (Next one is in February.)
When I reviewed the organization called National Association of Registered Social Security Analysts, I went to one of our regulators called FINRA. They have a list of designations and details on them to help investors weed out bogus designations from valid ones. It also helps you see what actually goes into the designation. You can see the details by going to FINRA.org5 and search for professional designations/RSSA.
Once I committed to the RSSA program, I quickly realized this was no gimmick. I also realized, I had taken the red pill, I was going to see how deep the rabbit hole goes6. Social Security is a bureaucracy, laden with 2,700 rules and a primary manual of 22,000 pages. Studies state that 96% of people get less than they should from SS and that $111,0000 is lost by the average American household7.
So, fast forward to now. We have been helping hundreds of people understand social security and making filing decisions based on planning and understanding the rules as it applies to them, individually. Many of these folks who attend our educational events and meet with us in our office, do not become clients. We want to teach people to get the best SS income. NARSSA8 is likewise dedicated to helping financial professionals help you get the SS income you are entitled to. An advantage of being an Registered Social Security Analyst is the support I get from NARSSA. This became key in the story I will now share.
In 2021, one of my clients received a letter from the SSA. It said that she had been overpaid benefits and would be required to repay $18,000.00 to the SSA. You didn’t know they could do that? Well, they can and do, all the time. Her SS checks were suspended and she would get them back in 5 years at 78 years old. This had a detrimental impact on her retirement, forcing her to work way past 70 years old.
She came to me very upset. We worked through appeals and calculations. Calling social security was of no help at all. The forms were complex and numerous. I called the NARSSA for assistance. An analyst named Norm was extremely helpful. My client decided to appeal and in November of 2022, an administrative law judge heard her case. This process took a year and a half to get to court.
I represented my client as an SS expert and presented the reasons why the overpayment should be waived. Before we went to court, I had explained that I was inexperienced in the appeal process and not an attorney. She asked me to represent her despite my inexperience. We presented the facts to a very kind and sympathetic Judge.
In December, we received notice of a favorable decision. The entire $18,000.00 repayment was waived! All her past/future Social Security checks would be reinstated.
Our Social Security advice typically supports our retirement, tax and investment planning. I provided my services without charge because she is a client. Our clients have access to our SS advice as part of our advisory services8. The lesson here is don’t take what the SSA dishes out. Get help to get what you are entitled to from your lifetime of paying SS taxes.
Sources Citations Bibliography:
⦁ MarketWatch “Almost 80% of Americans think the U.S. will experience great economic difficulty in 2023”
⦁ CBS NEWS “Bad recession” ahead, says Jamie Dimon
⦁ Source Bloomberg Factset
⦁ 2000 – 2013 the S&P 500 price ended where it started.
⦁ “FINRA does NOT approve or endorse any professional designation …” (Finra.org quote)
⦁ From the movie, “The Matrix.”
⦁ The Retirement Solutions Hiding in Plain Sight. “Capital One United Income June 28, 2019
⦁ National Association of Registered Social Security Analysts.
RSSA – Registered Social Security Analyst
CF2- Certified Financial Fiduciary
RICP – Retirement Income Certified Professional
Supplemental Disclaimers:
This article is informational only and is not investment advice. This is not an offer to buy, hold, or sell investments like securities or insurance products.
Securities and Investment Advisory Services are offered though Toro Bravo Investment Advisors, LLC. Life Insurance and Annuities sold as an insurance broker are not a fiduciary relationship and are not offered by Toro Bravo Investment Advisors, LLC.
Securities or Insurance are not FDIC/SIPC insured and investments contain risk plus could be subject to loss.
Losses could be short term or permanent. Numbers and figures illustrated are hypothetical in nature and past performance is not a guarantee or indication of future results/performance.
We are not affiliated with the Social Security Administration (SSA), Internal Revenue Service (IRS), or any Governmental Agency.
Do not rely solely on the Legal, Tax, or Financial information presented for it may not be suitable for your individual situation.
Consult your legal, tax, and/or financial professional before acting on any strategy or recommendation (i.e. major changes or before initiating the purchase, hold, or sale of any investment or investment strategy). Every individual’s strategy can differ depending on current circumstances and goals.