Tariffs, tax reform, rising interest rates, and more–2018 may be on the wane, but this year’s financial headlines will be with us long after January 1st, 2019. To usher in the New Year, Cowen Tax Advisory Group compiled the most important financial stories of 2018. While some topics saw more press time than others, all of them will impact our finances in 2019 and beyond.
Tax Cuts & Jobs Act
Congress passed the Tax Cuts and Jobs Act in the final weeks of 2017, and it went into effect January 1st of this year. The bill includes $100 billion in tax cuts for individuals, with 80% of households now in a lower tax bracket, making it the largest tax overhaul since the Reagan Administration. Read a summary of how tax reform will impact individuals here.
However, due to the late rollout of withholding tables and general confusion over the bill’s contents at the beginning of 2018, many employers may have failed to withhold enough from employee paychecks. The result? You might owe money in April 2019. Use this IRS calculator to determine whether you’re withholding the right amount.
Most of the bill’s components have a 2025 expiration date, so talk to your financial professional about how to make the most of them while they last.
Tariff Concerns & Trade War Woes
2018 bore witness to multiple rounds of U.S.-imposed tariffs on imported goods. Although the media’s gaze was riveted on major trade spats between the U.S. and China, other tariffs imposed on U.S. allies such as Canada, Mexico, and Korea also made importing goods more expensive.
Some companies are absorbing the higher costs, but others are passing it along to consumers. Taxpayers are also expected to foot the bill for a $12 billion bailout of the nation’s farmers, who were targeted by retaliatory Chinese tariffs on soybeans and pork.
Although the U.S. and China established a fragile truce in late November, delaying a 25% tariff on $200 billion worth of Chinese goods, the ceasefire ultimately depends on the success of trade negotiations in January and February 2019. If the countries fail to reach an agreement by February, the increase will go into effect. Expect to feel any failed negotiations in your retirement accounts.
Fiduciary Rule Shelved
An Obama-era rule that would require retirement advisors to act in the best interest of their clients was officially shelved in June. Ultimately, this is a win for predatory advisors and a loss for consumers. That’s why it’s more important than ever that you do your research while shopping around for financial professionals. Always look for advisors who are committed to the fiduciary standard and who put your interests ahead of their own.
Longest Bull Market
In August, Wall Street marked the longest bull market in history at a staggering 3,453 days. What is a bull market? It’s a period of time where stock values are expected to rise. The current bull has been running since March 2009. Unfortunately, bull markets don’t last forever. We can’t predict when the next recession will hit, but we can plan for it by making sure our portfolios aren’t exposing us to more risk than we can handle. If you haven’t checked on your holdings for a while or feel yourself getting anxious over recent market losses, consider working with a financial professional.
Sara McKinney
saractag@gmail.com
As Cowen Tax Advisory Group’s Digital Content Marketing Specialist, Sara provides in-house copywriting and manages the company’s electronic records system, email marketing, and blog.
