Investment Commentary –December 29, 2020
Year to Date Market Indices as of December 29, 2020

• Dow 30,403 (6.54%)
• S&P 3,735 (15.62%)
• NASDAQ 12,899 (43.76%)
• Gold $1,884 (23.83%)
• OIL $48.17 (-22.74%)
• Barclay Bond Aggregate (5.02%)
• Fed Funds Rate 0-0.25 (0-0.25)






Forbes: House Vote Keeps $2,000 Stimulus Checks On The Table—But Will The Senate Follow Suit?
On Monday, the House voted to increase the amount of the second stimulus checks to $2,000 and the measure passed by a two-thirds majority. This means that it now goes to the Senate, where Senate Democrats have said that they will vote for increased stimulus payments but Senate Republicans have signaled opposition, meaning it’s unlikely to pass.

President Donald Trump had already signed the coronavirus relief bill on Sunday night that included $600 stimulus checks, averting a government shutdown and releasing billions in aid to states, businesses and individuals—but he renewed his call for $2,000 checks for individuals. Trump initially said he wouldn’t sign the bill until Congress increased the individual stimulus checks to $2,000 per qualifying person ($4,000 per couple) but capitulated under pressure from his congressional allies including Senator Lindsey Graham (R-SC).

What’s In the New Coronavirus Relief Bill
The new stimulus package includes funding for another round of stimulus checks, continued enhanced unemployment benefits, funding for small business aid and the Paycheck Protection Program, among other categories. The rollout of these stimulus benefits comes when they’re at their highest need: 19 million Americans are on unemployment benefits of some kind; nearly 8 million Americans have fallen into poverty since the summer, and about 12 million renters will owe an average of $5,850 in back rent and utilities by January, according to analysis by Moody’s Analytics.

$600 Stimulus Checks
The new stimulus package includes another round of economic impact payments, also referred to as stimulus checks, to Americans. The new bill provides $600 for individuals who meet specified income requirements and an additional $600 per qualifying child.

The payment amount will decrease by $5 for every $100 made above the income thresholds of $75,000 for individuals, $150,000 for married couples filing jointly and $112,500 for heads of households. These income thresholds will be based on 2019 tax information. Individuals making $87,000 or more won’t receive a check; neither will married couples filing jointly making $174,000 or more, or heads of households making $124,500 or more.

Fox Business: Who’s ready for big Social Security changes in 2021?
The pocketbooks of working Americans and retirees could be directly affected by these changes

*Beneficiaries are getting a raise (albeit a small one)

As recently as May, the outlook was bleak for the U.S. economy and the 46 million-plus retired workers who count on a monthly benefit check from Social Security. The coronavirus pandemic was wreaking havoc on the U.S. economy and the average prices for goods and services were falling.

Federal stimulus and an easing of state-level restrictions during the late spring and summer months allowed the U.S. economy to regain its footing somewhat. This allowed the prices of goods and services in important spending categories (e.g., shelter, medical care services, and food) to head meaningfully higher. As a result, Social Security beneficiaries will net a 1.3% cost-of-living adjustment (COLA) in 2021.

*The well-to-do are going to pay more

Social Security has three sources of funding: the 12.4% payroll tax on earned income, interest income earned on its asset reserves, and the taxation of benefits. The payroll tax is, by far, the most important revenue generator, accounting for $944.5 billion of the $1.06 trillion collected in 2019.

This year, earned income (wages and salary, but not investment income) between $0.01 and $137,700 is subject to Social Security payroll tax. Meanwhile, any earned income above $137,700 is exempted from the payroll tax.

Next year, the upper bound of this taxable threshold, known as the maximum taxable earnings cap, is rising by $5,100 to $142,800. Since 94% of working Americans earn less than the maximum taxable earnings cap each year, this increase won’t affect them. But the other 6% could owe up to $632.40 extra in payroll tax in 2021.

*The full retirement age is on the rise

Back in 1983, the Reagan administration passed the last sweeping bipartisan overhaul of the Social Security program. The Amendments of 1983 introduced the taxation of benefits, gradually increased payroll taxation, and set out a four-decade gradual increase of the full retirement age — i.e., the age a retired worker is eligible to collect 100% of their monthly payout, as determined by their birth year.

In 2021, the full retirement age will increase by two months to 66 years and 10 months for persons born in 1959. This will be the fifth consecutive year the full retirement age has increased by two months, but it marks only the 11th time since the Social Security Act was signed into law in August 1935 that the full retirement age has been changed.

*Early filers who are also working may be able to keep more of their income

Not all seniors receiving a Social Security retirement benefit leave the workforce. The idea of pocketing a wage or salary plus a monthly Social Security payout probably sounds fantastic, but the Social Security Administration (SSA) may penalize early filers (those who take their payout before reaching full retirement age) if they earn too much.

For instance, early filers who won’t reach their full retirement age in 2020 are only allowed to earn $18,240 for the year ($1,520 a month) before the SSA begins withholding some or all of their benefits. For every $2 in earnings above this threshold, $1 in benefits is withheld. Benefit withholding also applies to seniors who will hit full retirement age in a given year, but have yet to do so.
In 2021, early filers who won’t reach their full retirement age can earn up to $18,960 ($1,580 a month) before withholding kicks in. This should allow early filers to earn a bit more should they choose to continue working.

*The rich get richer

The last big change is that we’ll see the wealthiest Social Security beneficiaries padding their pocketbooks.

Just as there’s a cap on the amount of earned income that’s subject to the payroll tax, there’s also a cap on monthly benefits paid at full retirement age. Whether you’ve averaged $200,000 annually over 35 years or $10 million over the same time frame, payouts are capped at $3,011 per month at full retirement age in 2020. Next year, the rich can get even richer, with the maximum monthly benefit at full retirement age increasing to $3,148.

Upcoming Events
Thursday: Weekly unemployment , U.S. Department of Labor
Friday: New Year’s holiday observed, financial markets closed

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.

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