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  • Writer's pictureNate Baim, MBA, CFP®

What are your financial regrets?

Enjoy this week's edition of the Planner's Beta

Beta (n) - climber's jargon that designates information about a climb This digest's purpose is to share observations, ideas, and treasures found this week which you may also find insightful. Sharing does not mean it's an endorsement. I am endorsing the pursuit of knowledge and exploration.

Raiding the pot: how the pandemic has deepened the pensions crisis (The Financial Times) - As many are witnessing, COVID seems to accelerate the speed of pre-coronavirus trends. Not only in the US, but around the world, retirement savers are facing ever-increasing risks of not being adequately funded for their advanced years. Many countries, included the US, allow retirement savers to draw on their retirement accounts. Although it may be necessary, given today's challenges, drawing on retirement accounts will probably require additional work and savings to fill the gap. And for the foreseeable future, savers will likely experience low interest rates. Low interest rates will make it troublesome for pensions and defined contribution plans to catch-up.

Millennials share their top financial regrets to help Gen Z get started (CNBC) - Millenials passing the age of 30 reflect on what they wish they did differently with their money while in their 20s. The list of regrets includes not saving enough, taking on credit card debt, not having a financial plan, and bad spending habits. As with many things in life, taking the first step is often the most important. Starting your financial journey on the wrong foot can be corrected. Those looking to take control of their finances may take several simple steps to begin improving. First, take the time to learn about your self and your goals. To do this, you may journal about what you value and write out your specific, time-bound goals. Next, create a money management plan which complements your goals and values. You may do this by creating a budget and banking structure. Last, learn and pursue your goals. You can do this by researching, doing, and seeking help from a financial professional.

Fed stops big banks from buying back stock, caps dividends (Associated Press) - The Dodd-Frank Act went into effect after the Financial Crisis. The law requires the banking system to perform stress-tests periodically. The tests' goal is to help bank managers and industry regulators understand what risks may lie within the banking system. The banking system recently completed a round of stress tests. Instead of modeling hypothetical scenarios for these stress tests, the scenarios modeled concerns stemming from the coronavirus. The test's parameters included modeling a 19.5% unemployment rate and a double-dip recession with a 37.5% decrease in GDP. Under these dire hypothetical scenarios, none of the major banks fail (but they do take significant losses). The findings in the trials compelled the Federal Reserve to require banks not to pay out dividends or purchase any of their stock until September 30th. This decision attempts to keep the banking system stable. When banks are unable to issue dividends or share buybacks, they, in theory, will have more capital on hand. This capital helps them cover losses, making them more resilient in a banking crisis.

Flow Chart of the Month

Deciding whether to contribute to a Roth IRA or Traditional IRA is a common question for retirement savers. Assuming you qualify to add to these accounts, much comes down to your expected future income tax rates compared to your current tax bracket. The flow chart below illustrates how to tackle this decision.

Quote of the Week

"We can only see a short distance ahead, but we can see plenty that needs to be done." - Alan Turing


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