Inflation Creeping into Personal Finances

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If you have a balance on a credit card or an adjustable-rate mortgage, you might be noticing changes in your payments. Higher interest rates are starting to ripple through the personal finance landscape, and it doesn’t look like that trend will change anytime soon.

The Federal Reserve has indicated it plans to keep raising short-term interest rates to help manage inflation, which is at its highest level in 40 years. You’re likely seeing the effects of inflation when buying gas or groceries, and you’ll notice it if you are shopping for a new or used car.

The Federal Reserve’s job is to control inflation. By raising interest rates, the Fed hopes to slow spending, bringing down consumer prices.

Time will tell whether higher interest rates will prompt us to consider changes to your portfolio. Remember, your overall strategy considers that there will be transition periods in the economy.

In the meantime, you may want to look at I Bonds, which are issued by the U.S. government and earn a fixed interest rate plus a variable interest inflation rate that’s adjusted twice a year. I Bonds have certain purchase limits, restrictions, and tax treatments, so they generally play a limited role in your financial picture.

If you have any questions about inflation or interest rates, please reach out. We’re always here to help put things into perspective.

April is Financial Literacy Month

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April marks the start of Financial Literacy Month, a nationally recognized movement to promote and support financial understanding in children and teens. For many, it’s a fantastic opportunity to teach and connect with their children or grandchildren, and these kids are ready to learn! Recent data shows that nearly 74% of teens desire to be financially literate, and 86% want to learn how to invest.1

Teens tune in
Every parent has questioned if their child is actually paying attention. But rest assured, our children and grandchildren are listening: 75% of teens in America identify their family as their most trusted source of financial education. In other words, our youngest savers and investors are looking to us for their financial education.2

How to start
It all begins with a frank conversation regarding finances. By demonstrating your openness to discussing what many consider a “taboo” topic, you’re also modeling how to approach finances for your young learner. In time, they’ll learn to view financial issues and goals clearly with as little unnecessary stress as possible.

A bright future
Financial literacy month has been shown to have a lasting, positive impact on our future investors. Children who are taught personal finance from a young age are more likely to secure lower-cost loans and grants when paying for college and less likely to rely on private loans or high-interest credit cards.3

If you decide to put your “teacher” hat on this month, let us know! We’re always happy to help educate and support our future generations.

1. Greenlight.com, 2021

2. Greenlight.com, 2021

3. CNBC.com, 2021

TSP – LOOK FORWARD TO THESE NEW FEATURES COMING IN JUNE!

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PARTICIPANT SERVICES WHEN AND HOW YOU WANT IT

Get participant services on your terms. You’ll have access to a virtual assistant 24/7 to help you find answers and resources. And, when you’re logged in to My Account or the new TSP Mobile App, you can connect with a “ThriftLine” Representative during business hours using a new live-agent chat function. As always, you’ll still be able to reach us by phone. Click on link for important dates and deadlines. Key transition dates | Thrift Savings Plan (tsp.gov)

SECURE Act 2.0 Passes House

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SECURE Act 2.0 Passes House, Signaling Massive Retirement Savings and Investment Policy Shift

On March 29, the House of Representatives voted 414-5 in favor of the Securing a Strong Retirement Act of 2022. If passed by the Senate, and then signed into law by President Joe Biden, the act could represent a massive economic policy shift regarding retirement savings and investment.

The retirement savings legislation, also known as SECURE Act 2.0, expands on the original SECURE Act and includes provisions to boost the required minimum distribution (RMD) age from 72 to 75 over time, broaden automatic enrollment in retirement plans, and enhance 403(b) plans.

The original Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed into law by former President Donald Trump in December 2019. This legislation altered the existing retirement savings plan system in terms of RMD, contributions to traditional IRAs, 529 plan uses for student loans, and making annuities easier for 401(k) plan administrators to offer.
The SECURE Act 2.0 expands on all of these provisions, including increasing the RMD age further to 73 in 2022, to 74 in 2029, and to 75 in 2032.

It also requires 401(k) and 403(b) plans to automatically enroll participants when they become eligible, though employees may opt out of this coverage. The automatic enrollment amount starts at a minimum 3% of salary — but no more than 10% — followed by a 1% increase each year until it reaches said 10%. There is an exception to this requirement pertaining to small businesses with 10 or fewer employees, new businesses (those less than three years old), church plans and governmental plans.

The SECURE Act 2.0 also changes policies on catch-up limits concerning retirement plans (and indexes IRA catch-up limits to inflation beginning in 2023), student loan repayments and employer matching of such as retirement contributions, small employer pension plan start-up credits, and collective investment trusts (CITs) in 403(b) plans. Further, the legislation opens up opportunities for exchange-traded funds (ETFs) in variable annuities.

Talking about the bill in his “Update on the March-April Work Period” letter on March 25, House Majority Leader Steny Hoyer proclaimed: “By expanding automatic enrollment in employer provided retirement plans, simplifying rules for small businesses and helping those near retirement save more for longer, this legislation will help increase Americans’ access to retirement funds and help families save for the future.”

Citation GOBankingRates.com: