Thank you for joining me today for two minutes on the economy, an interesting story, and a financial planning tip. My wife Jenny and I enjoyed our July 4th with friends on Long Lake. I feel blessed to write this update on July 5th from the Little Garden Cafe, next to Audubon Park.
Economy
The U.S. added fewer jobs in June than last month, but not by much, so it's not too alarming. The Fed's primary goals are to keep inflation low and keep employment high. Even if we continue to see employment fall, it isn't necessarily a bad sign if inflation continues to drop. Inflation is the number one priority right now. The Fed expects the economy to cool off to fight inflation. But if employment falls and inflation lingers, we could see more economic pain because the Fed may be forced to raise interest rates even further.
Interesting Story
Two important political events are happening right now in the world. On July 4th, the UK kicked out its Conservative Party after 14 years and joined the Labour Party. During that time, the UK grew at a poor 0.5% GPP each year, with bad wage growth and a 14% weaker pound than in 2010.
In contrast, France's elections on Sunday are projected to make a huge change from the left to an ultranationalist, far-right party. This change will greatly impact France's relationship with the European Union and the rest of the world as they anticipate focusing internally.
Financial Planning Tip
Starting in 2026, you could pay more income tax. The TCJA, which passed in 2017 and lowered tax rates, ends in 2025. If the law isn't extended, the tax rates will move from 10% to 10%, 12% to 15%, 22% to 25%, 24 to 28%, 32% to 33%, 35% to 35%, and 37% to 39.6%.
Accelerating income may make sense if rates are increasing. Legislation makes financial planning more difficult because our assumptions can change. It's the unpredictable piece of a puzzle. The higher tax rates we see, the more it makes sense to make traditional and fewer Roth contributions.
To talk with one of our Spokane financial advisors, click this link.
About the Author
Noah Schwab CFP® is a financial advisor in Spokane, Washington, specializing in helping couples with 401k five years from retirement.
- Fiduciary. No commission, no products
- Investment management and financial planning
