Published Wednesday, August 18, 2021 at: 9:52 AM EDT
Here’s a retirement planning alert built for current financial economic circumstances—an explanation of the current situation followed by a timely and high-value retirement investing tip.
The manufacturing purchasing managers index ticked lower in July but it’s not too far off from its all-time record-high, while the service sector purchasing manager index shot higher, breaking a new record high. The service sector accounts for 89% of U.S. economic growth.
Meanwhile, business owner optimism ticked lower in July and the S&P 500 hit a new record high for the 48th time in 2021.
The Optimism Index, a monthly survey of business owners, decreased by 2.8 points in July to 99.7, reversing nearly the entire 2.9-point gain in June’s report. Notably, 49% of business owners reported job openings that could not be filled, an increase of 3 points from June and a 48-year record high.
Since the March 23rd, 2020, Covid bear market low, the Standard & Poor’s 500 stock index is up more than 60%! Inflation uncertainty and the Covid variant could cause a sharp drop in stock prices anytime, but a recession is not threatening and the economy is growing fast.
Financial conditions, as they are currently, make it wise to consider whether the next sharp drop in stock prices would present a strategic tax opportunity to convert traditional IRA or 401(k) assets invested in stocks into tax-free Roth IRAs.
With tax rates expected to be going up, and the stock market breaking records for 11 months, retirement savers should proactively investigate converting to a Roth IRA in 2021.
A Roth IRA conversion gives you a tax-free income stream for life and, when you die, your spouse gets tax free income for life, too. Your children or other non-spouse beneficiaries get tax free income for 10 years and then a tax-free lump sum inheritance after 10 years.
This is an important tip that we cannot emphasize enough but it requires action by the end of 2021.
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