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Embracing Optimism and Looking for Investment Opportunities

Headline writers love superlatives: the "biggest" drop, the "highest" inflation rate, the "most" pessimism, and so on. Those words might generate clicks and keep you glued to cable news. But they don't tell the full story of where our economy has been, where it is right now, and where it's probably headed.

On today's show, we look to history for perspective on our current challenges and discuss some important opportunities that many investors should be thinking about during this market correction.

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Bill Keen ·Embracing Optimism and Looking for Investment Opportunities

1. Taking in the big picture. 

At the end of May, we passed the 79th anniversary of President Franklin D. Roosevelt signing the Securities Act of 1933. Passed during the Great Depression, this law was designed to create more transparency in the markets and protect investors from fraud. At the time, the United States had 25% unemployment, the Dow Jones Industrial Average was around 1,800, and Adolph Hitler had just been appointed chancellor of Germany.

Despite all the problems that we're facing right now -- including an ongoing war in Europe, inflation, and recession worries -- the Dow Jones sits around 30,000 and unemployment is under 4%. Our economy is still growing, still adding jobs, still producing goods and services that consumers are buying.

Now, those positive numbers are cold comfort to all the folks who are struggling to pay their bills or worried about their retirement accounts. But successful investors learn how to cope with short-term disruption while still maintaining their focus on long-term goals. If you lose sight of that big picture and start making emotional moves with your money during bouts of volatility, you could be jeopardizing your security in retirement.

2. Looking for opportunities. 

For most investors, the best move during a market correction is to stick with your saving and investment plan. Given the current state of inflation and gas prices, some folks might also review their budgets, cut back on excess spending, and pad their savings a bit. These are simple, proactive steps you can take to control the things that you have the power to control when the economy is bumpy.

But often there are also opportunities during a downturn that you should discuss with your advisor. If your budget and savings accounts are in good shape, you might consider making additional contributions to your investment and retirement accounts, essentially "buying low" on securities that won't stay down forever.

Converting part of your nest egg into a Roth IRA might also be beneficial. Yes, you'll pay taxes now on the amount that you convert. But while the markets are down, you would be able to convert a larger percentage of your wealth into an account that will grow tax free as the markets start to recover. In these conditions, you might think of Roth conversions as being "on sale," provided that you and your advisor lock down the appropriate conversion amount and timing.

3. Anticipating potential changes. 

Another reason that a Roth conversion might be beneficial for some folks eying retirement is that there's a decent chance taxes are going to go up in the next couple years. The personal tax benefits in the Tax Cuts and Jobs Act of 2017 are set to expire in 2025, and it's anyone's guess what will happen to tax policy in the run up to the 2024 election. Having more money compounding in a Roth IRA that you can withdraw tax-free might reduce your eventual tax burden once you start taking required minimum distributions.

There are also some interesting proposals floating around Washington that could affect the 529 plans you may have started for your kids or grandkids. The bipartisan College Savings Recovery Act proposes that folks be allowed to make penalty-free conversions of 529 funds into a Roth IRA. Removing the penalty for withdrawing funds from 529s that weren’t needed for education could encourage more families to ramp up their college savings plans and affect how retirees approach their estate planning.

These are the sorts of potential changes we keep in mind at Keen Wealth when we're balancing present needs and long-term goals in our financial plans. And while we don't want to sound like Pollyanna in the middle of a tough year, we remain confident in our planning process and optimistic about the long-term health of the economy.

To quote the author Morgan Housel: "Real optimists don't believe that everything will be great. That's complacency. Optimism is a belief that the odds of a good outcome are in your favor over time. Even when there will be setbacks along the way, the simple idea that most people wake up in the morning trying to make things a little better and more productive than wake up looking to cause trouble is the foundation of optimism. It's not complicated. It's not guaranteed either. It's just the most reasonable bet for most people."

Get in touch with my team at Keen Wealth and we'll help you find that mix of optimism, realism, and pragmatism that's going to help you feel more in charge of your financial future.

About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

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