Hello,

We had a new experience this past weekend. We drove down to Hilton Head Island for the long Easter weekend, and we went to a sunrise service on the beach on Sunday. It was beautiful to watch the sun come up over the ocean like the way Jesus came up from the grave!
David and his family
We ate more food than we should have and one of our servers told us about a giant playground that was designed like a pirate’s ship. Amelia and Ansley loved playing on it.

The water was too cold to get in at the beach but that didn’t stop Amelia from wanting to dig in the sand. I think one of the best things about kids is their vivid imaginations. Listening to her talk about her sand creations and what she is designing was entertaining. Amelia pictured below on the battleship playground.
Amelia on the battleship playground
In the absence of bad markets, sometimes we use our imaginations to think of all the things that could go bad. It isn’t hard to do these days. Yahoo Finance ran an article this week that said, “Crash or Soar? Traders Are Preparing for Stock Market Extremes.” We’re coming off one of the strongest quarters for the S&P 500 Index in decades, and the article states “Wall Street isn’t particularly worried about a little slump.”
 
We have a little room to breathe in the short term because the government has built up an arsenal in the form of higher interest rates. If things were to go south in the economy, the Federal Reserve could cut rates to stimulate the market. Given that interest rates are at forty-year highs, our arsenal is hefty.
Amelia and Ansley in Easter dresses
Remember if rates come down, that means borrowing for the average consumer is easier and suddenly new cars and homes are more affordable which creates demand.

I could be wrong and black swan events have happened. With wars heating up across the globe, only time will tell how it impacts America. There's plenty that could go wrong and drag the market down.
 
Longer term we have major problems that merit our consideration. From Yahoo, “The Congressional Budget Office warned in its latest projections that US federal government debt is on a path from 97% of GDP last year to 116% by 2034 — higher even than in World War II. The actual outlook is likely worse.”
 
The article continued, “With uncertainty about so many of the variables, Bloomberg Economics has run a million simulations to assess the fragility of the debt outlook. In 88% of the simulations, the results show the debt-to-GDP ratio is on an unsustainable path — defined as an increase over the next decade.”
Ansley playing in the sand
The sad reality is Congress probably isn’t going to do anything about it until a crisis happens. From the article, “Former Treasury Secretary Robert Rubin said in January the nation is in a ‘terrible place’ with regard to deficits. From the realm of finance, Citadel founder Ken Griffin told investors in a letter to the hedge fund’s investors Monday that US national debt is a ‘growing concern that cannot be overlooked.’ Days earlier, BlackRock Inc. Chief Executive Officer Larry Fink said the US public debt situation ‘is more urgent than I can ever remember.’ Ex-IMF chief economist Kenneth Rogoff says while an exact ‘upper limit’ for debt is unknowable, there will be challenges as the level keeps going up.”
 
We’ve got the facts. Now what? I don’t want to discuss a problem without giving possible solutions. For most people in retirement (or within 5 years of retirement) we need to be downside focused first. When we are young, we can swing for the fences, but in retirement our goal is base hits. Getting on base and not striking out is the name of the game in retirement.
 
What that looks like is segregating a portion of our funds into an income-producing bucket to draw off for the next ten years. Then we let our market money run and Lord willing over the next ten years it highly appreciates so that by the time the income-producing bucket is depleted we can refill it from our market bucket.
 
After we have our income strategy figured out, we want to figure out how we can mitigate one of the greatest risks most retirees have in retirement. It’s tax rate risk.
 
When we began using a tax-deferred account like a 401k we made a business deal with the government with uncertain terms. We agreed that later in our life we would take money out of those accounts and pay whatever the tax rate is at that time. If you’re like most of our clients you’ve used an account like this.
 
Getting ahead of a potential tax problem now while tax rates are historically low may be a wise move, because the government’s mismanagement of our national resources has to be paid by somebody. When the government comes looking for a few good men to pay more taxes than you legally have to now, you may not have to be one of them if you’ve done pre-planning.
 
Until next week,

David C. Treece,
Financial Planner
864.641.7955
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Clients Excel, LLC is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through Creative One Wealth. Creative One Wealth and Clients Excel, LLC are not affiliated companies. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified tax professional for guidance before making any purchasing decisions. Clients Excel, LLC is not affiliated with or endorsed by the U.S. Government or any governmental agency. Clients Excel, LLC has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. Published on 04.03.2024.