Financial Insights

Market Snapshot August 8, 2022

While last week didn’t have the blockbuster appeal of headline-grabbing economic news, it may have provided even more valuable context to the current market environment. It was a choppy week for the major stocks, with the S&P 500 finishing the week with a small gain of 0.39%. Within the large cap equity index, the rally in the consumer discretionary and technology sectors continued (1.17% and 2.00%) with additional participation from communications services (1.16%). The biggest laggard among sectors came from the energy space with a loss of -6.80%. Other trailing parts of U.S. large caps included the cyclical sectors of materials and real estate (-1.29% and -1.32%). When expanding beyond the domain of broad domestic large cap stocks, other equity subclasses had similar choppiness. The NASDAQ benefitted from its tech-heavy composition and ended the week with a 2.18% return. U.S. small cap stocks joined in on the rally and outperformed their large cap counterparts (1.96%).   International and emerging market equities ended the week on separate sides of the gain/loss columns; with developed markets down on the week (-0.23%) and emerging markets notching a gain (0.97%). Driving the up and down week for equities was a volatile week in the bond market, which saw bond yields end the week higher and the core bond index closing Friday with a weekly loss of -1.04%.  

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ExxonMobil Pension Update: Q4 2022

Concerns around the effect that higher rates have on the ExxonMobil Pension Plan’s lump-sum values continue to be a key theme throughout 2022. As we highlighted in our pension updates in February and April, higher interest rates (driven by inflation) cause a negative effect on the value of your ExxonMobil pension. We’ve helped many ExxonMobil employees assess the negative impact of these rates on their retirement plans and, where appropriate, recommended an earlier retirement date to avoid pension losses. If you’ve elected to stay with the company, it’s important to understand where things stand now, and what future interest rate moves might look like. Will rates go higher? Will your lump sum go lower? We discuss more below.

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How Does a Spousal IRA Work?

The Individual Retirement Account, or IRA, is a retirement savings account that allows individuals to save and invest money for retirement on a tax-deferred basis. There are two primary types of IRAs: Traditional and Roth. In a traditional IRA, you generally get a tax deduction for your yearly contributions on your tax return, but the proceeds are taxed as ordinary income when they are withdrawn. In a Roth IRA, you cannot take a tax deduction for your yearly contribution, but the contributions and investment growth are generally 100% tax-free when used in retirement. For more information regarding Traditional vs. Roth IRAs that include contribution limits and exceptions, please see our comprehensive IRA guide outlining the difference between the two account types.

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Roth Conversions in Down Markets

While no investor would like to see down markets, they are unfortunately an unavoidable part of the ­­market cycle. In periods of prolonged down markets, it is easy to focus on your declining portfolio balance rather than seeking opportunities in other areas of your encompassing financial plan. A weak market like we have experienced year-to-date can create opportunit­­ies for several tax strategies such as tax-loss harvesting and Roth conversions. We want to discuss how individuals like you can reap the most benefit from completing ‘discounted’ Roth conversions.

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About Rhame & Gorrell and Our history

Rhame & Gorrell Wealth Management (RGWM) and its advisors have been providing sound financial advice to The Woodlands and Greater Houston community for over 25 years. After decades of wide-ranging experience with various large firms throughout the investment management industry, Jeff Rhame and Michael Gorrell made the decision to become an independent fiduciary registered with the Securities and Exchange Commission (SEC) as a fee-only financial planning and investment advisory firm in 2016.

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Q2 Segment Rates Reduce ExxonMobil Pension Lump Sums

As inflation drives prevailing bond interest rates higher, a knock-on effect that directly impacts employees of ExxonMobil is the reduction of lump-sum distribution value for the ExxonMobil pension plan. The vast majority of current employees are subject to a lump-sum calculation that uses “Segment Rates” to determine the present value of the pension annuity payments. For many employees, rolling over the lump sum of the pension value into an IRA is an attractive option at retirement. Increased Segment Rates reduce the lump-sum – in some cases dramatically.

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