Financial Insights

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Rhame & Gorrell

Restricted Stock and the 83(b) Election

Companies give out many forms of equity compensation. A common form of equity compensation is Restricted Stock. There are two main types of Restricted Stock, Restricted Stock Awards (RSA) and Restricted Stock Units (RSU). We have already discussed RSUs and how they work in another article (please click here to see it). This article will discuss RSAs and the beneficial 83(b) election that can be made on them.

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September 20, 2022 Market Snapshot

It was a poor week for the stock market, as segments across the board experienced pullbacks. The S&P 500 retreated -4.73% for the week, with the biggest detractors coming from the materials (-6.64%), communications services (-6.42%), industrials (-6.37%), real estate (-6.23%), and technology (-6.11%) sectors. Consumer staples (-3.48%), financials (-3.77%), and utilities (-3.78%) held up better than the S&P 500 as a whole, but still sustained losses. The best sectors for the week were the healthcare (-2.32%) and energy spaces (-2.59%), but these rounded out a week that saw every sector of the large cap stock benchmark fall. U.S. small cap stocks outperformed their large cap peers by a small margin, ending the week down -4.46%. Stock markets overseas showed better results but still saw weekly losses. International developed stocks (MSCI ACWI ex US index) ended the week down -2.76% while emerging market stocks (MSCI Emerging Markets index) outperformed developed markets with a loss of -2.61% for the week. A likely partial catalyst for these losses was a continued rise in bond yields, with the 10-year treasury yield closing at just under 3.45%. The rise in yields coincided with the Barclays U.S. Aggregate Bond Index declining -0.93%.

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Equity Portfolio Allocation: It's Not a Simple Calculation

You might have been told at some point in your life that there is a simple calculation you may use to determine how you should allocate your assets between equity and fixed income assets. This formula is rudimentary and does not consider your personal retirement goals or risk appetite. This equation has misled investors for years and can cause you not to have sufficient assets to meet your goals or leave you awake at night, fearing that your accounts are too volatile or risky.

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2022 Tax Information

As we reach the end of the year, a tax topic that will be discussed more will be the IRS 401(k) contribution limits. This contribution limit has a significant impact on your retirement savings and the strategies that are available to you. The 401(k) contribution limits for 2022 are as follows:

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Microsoft Corporation Deferred Compensation Plan

A beneficial tax planning strategy is available for high-income earners Level 67 or higher at Microsoft through Microsoft’s Deferred Compensation Plan (DCP). This plan allows high-income earners to shift income earned in years where they might be in higher tax brackets to years when they will hopefully be in lower tax brackets. The DCP can be very complex, and it is advised that you talk to a financial planner to discuss all of the benefits and options available to you.

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How Do Periods of High Inflation Impact Your Taxes

Inflation is ravaging America’s economy as well as household budgets. Thankfully, when it comes to federal income taxes, inflation has some positive impacts. That’s because the IRS makes annual adjustments to certain tax limits and phase-out ranges. When inflation is high, as it is now, those adjustments can effectively increase the value of some federal tax credits and deductions. An example of this is the income tax brackets themselves. While the percent tax rates do not change year over year, the amount of income that places you in each of those brackets is adjusted for inflation every year. So next year, you may feel like you received a bit of a tax break even if your taxable income essentially stays the same because you could end up in a lower tax bracket. If you are a person who collects social security, you could also see a significant increase in your monthly payment amount as these payments are adjusted for inflation annually. Other common tax return items that are adjusted for inflation are the following:

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