The earliest reading of first quarter of 2018 shows that the U.S. economy grew at a surprising pace. Gross domestic product expanded 2.3% in the first three months, far better than the 2.0% forecasted by economists. Although this looks like a slowdown from the 2.9% posted in the fourth quarter of 2017, Q1 readings often look sluggish compared to the rest of the year. Signs point to continued strength in U.S. output.

The S&P 500 changed course and speed in April, posting a fractional advance compared with March’s 4% drop. At the end of last month, it was less than half a percent below the year-to-date break-even point.

The CBOE VIX index, which measures market volatility, suggests that investors are more optimistic about the future than they have been in months. Over the course of April, the VIX dropped from the low 20s to below 16. It’s still significantly higher than it was in 2017’s dream market, but it’s lower than historic norms.

European equity markets have likewise regained their footing, with Germany’s DAX rising around 5% in April. British and French stock markets also came out well ahead.

In Asia, the Shanghai index continues to get hammered by Sino-American trade war whispers, losing another 2.5% in April. Meanwhile, Japan’s Nikkei and Hong Kong’s Hang Seng indexes were up 5% and 2%, respectively.

Switzerland has scheduled a constitutional referendum for June 10 to determine who has the right to create money.  In essence, the confederation’s private banks currently create much of their own money in the course of taking deposits from savers and lending to borrowers. The so-called Vollgeld (“sovereign money”) initiative would reserve that prerogative solely to the Swiss National Bank. The SNB itself is against the proposal, as are the private banks of course. Vollgeld proponents believe that, by fundamentally requiring a franc on deposit for every franc loaned, the initiative will prevent future bank bailouts as had occurred during the Great Recession.

After March’s 5% rise, oil prices’ run seems to be coming to an end. A modest April increase of 0.6% could be just a seasonal effect, and it’s possible that crude will stay in the $60 to $70 range for some time to come. Meanwhile, gold has not budged since February from the trading range between $1,300 and $1,350 per ounce, which has defined its year-to-date story.

The drama in the foreign exchange markets appears to be over for now. The dollar showed unexpected strength over the course of February, but March saw relative stability against the other major currencies.

As we noted in this space last month, metal prices can be seen as a proxy for concern over trade war prospects. Apparently, the gold market is unperturbed. Another measure of international trade prospects is the Baltic Dry Index, which measures shipping volumes. It actually gained about 40% in April.

Can you answer the 4 most important questions about your retirement planning?

by Steve Anglin, CPA

If you’re like most of us, you haven’t thought too deeply about your retirement savings for some number of years. As with the W-4 form mentioned elsewhere in this newsletter, you might have made a selection the day you were onboarded and haven’t given it a whole lot of attention since. You get your periodic statement from your retirement plan, and, as long as that top-line number keeps getting bigger, you don’t sweat the details.

So you probably know the answer to the first Important Question About Your Retirement Planning:

What percentage of your paycheck goes into your retirement account?

This number has most likely never changed over the entire course of your employment. Moreover, it’s probably the same number most of your co-workers have selected. That’s because odds are very few of the people you work with have considered Important Question About Your Retirement Planning Number Two:

Why that number?

In all aspects of our lives, most of us select whatever numbers are presented to us. Not required. Not even advised. Just presented. If someone at the office is selling raffle tickets for $1 each, they’ll probably sell a lot of tickets one at a time. But if they sell books of five for $5, they’ll go home with more pictures of Lincoln than Washington. It’s just how we’re wired.

And so it goes for our paycheck withholding too. Did you know the IRS never even sees the W-4 form you spent so much time filling out? It has no force of law. Still, most of us go through the worksheet and deduct what we calculate we ought to. Then we usually end up overpaying our taxes all year long, in essence giving the U.S. Treasury an interest-free loan every year, as discussed here.

But at least we put in the effort on the W-4, so we feel we own the answer and tend to be more comfortable with that than just guessing. However, when it comes to savings or stock ownership or retirement deferment, we tend to go with an entirely arbitrary percentage.

Which brings us to Important Question About Your Retirement Planning Number Three:

Is the company contribution alone enough to pay for your retirement?

Does your spouse work? Do you have sources of passive income? Maybe you don’t need as much take-home pay as you’re pulling in, and maybe your nest egg is on the light side.

And maybe you got a late start planning for retirement. That’s not an indictment on your character. Lots of people are stuck paying off their own student loans well into their 40s. Others might have found it difficult to put money away during their military service. In these and in other cases, many of us were too busy saving for a down payment on a house or for our children’s education.

How much you should be saving in excess of what you’re saving now is a highly complex, personal, and unique decision. You should consider consulting a professional retirement planner to help you get your arms around it. Which brings us to Important Question About Your Retirement Planning Number Four:

What are my options?

Your employer-sponsored retirement account is certainly a good start to your retirement planning, but it might not be sufficient. Fortunately, there is an array of strategies you can avail yourself of in pursuit of your post-employment financial security.

You’ve heard of individual retirement accounts (IRAs) but, the more you hear about them, the more confusing they may sound.

That’s because there are at least four flavors of IRAs, and everyone’s palette is a little different.

Traditional IRAs have been around since the mid-1970s, but they’re not for everyone. Generally speaking, the money you contribute to your traditional IRA is pre-tax income, meaning that you don’t have to pay taxes on it in the year contributed. You will have to pay taxes on it when you take a withdrawal from your IRA,  but most people find themselves in a lower tax bracket at that point in their lives compared to when the contribution was made. However, if your earnings are too high in the contribution year, you might find yourself partially or fully phased out of the opportunity to take the deduction then.

Roth IRAs are made with after-tax contributions. So, a Roth IRA  doesn’t give you any kind of tax deduction at the front end when contributions are made, but you’re allowed  to withdraw money from these accounts tax-free down the road.  Similar to traditional IRA deductibility, you can be phased-out of eligibility to contribute directly to a Roth IRA, but there are currently no phaseout limits on Roth conversions.

The laws governing IRAs change gradually, and one change that resulted from recent tax legislation deals with a transaction called a “recharacterization.” The recharacterization rules allow you to undo a traditional IRA or Roth IRA contribution. You might want to do this if, at the end of the year, you find out that you made too much money and are ineligible.  Here’s the important change: Prior to this year, you could “take a mulligan” and recharacterize a Roth conversion. Now, however, a Roth conversion is irrevocable, so you need to be certain such a move is in your long-term best interests and won’t cost you penalties. There are ways to blur the line using a technique  known as a “backdoor Roth” but, if you try this without expert advice, you risk triggering a taxable event or even a penalty charge.

Traditional and Roth IRAs are the best-known, but the list goes on.

If you have a side business, maybe a Simplified Employee Pension (SEP) or Savings Incentive Match Plan for Employees (SIMPLE) IRA, would suit you. They’re worth looking at whether you’re soloing or if you have employees to whom you’d like to extend retirement benefits.

Remember the “I” in IRA stands for “individual”. These are self-directed investment vehicles. You pick whatever assets in whatever classes you want to fund your IRA. If you want to park it all in U.S. savings bonds, feel free. You want to put every penny into cryptocurrencies, that’s another discussion we need to have but, ultimately, it’s your money.

So, if you need advice not only on choosing the best vehicle to save for your retirement but also on optimizing your investment portfolio within that vehicle, contact a professional financial advisor.