Newsletter Dec 8, 2024: Clarity With Financial Planning

This week's newsletter is proudly sponsored by Boldin, the ultimate DIY retirement planning tool. Whether you’re managing real estate investments, considering a Roth conversion, or projecting your future passive income, Boldin has you covered.

Dear Financial Samurais,

Lately, I’ve been on a retirement planning kick, inspired by my conversation with Bill Bengen, the creator of the 4% Rule. Here’s a key insight for 2025: singles can earn up to $63,350 and married couples up to $126,700—all tax-free at the federal level!

Considering the median U.S. income is around $45,000 per person and $70,000 per household (pre-tax), this tax-free income threshold is sweet sugar for many retirees. Even better, in retirement, you no longer need to save for retirement.

Not saving for retirement was one of my blind spots before I left my job. During my final working years, I saved 70% of my income. So, losing 80% of my income in my first full year of retirement didn’t feel like a big deal. The higher your saving rate, the smoother the transition.

The Roth IRA vs. tax-deferred accounts debate is always hot among retirement planners. But with these 2025 tax thresholds, that debate might be moot given the generous tax-free income limits.

Key takeaway: Don’t neglect building your taxable brokerage account and other taxable investments. They’re essential for tax-efficient withdrawals in retirement.

To learn more, check out my latest post: Maximizing Tax-Free Income And Withdrawals In Retirement

Every Wall Street Strategist Is Bullish

Every Wall Street strategist seems bullish for 2025, with a median S&P 500 target price of 6,500, suggesting about 7% upside. Here's a helpful chart summarizing these projections.

S&P 500 2025 year-end forecasts

I’m less optimistic. The S&P 500 is trading at 28X current P/E and 23X forward P/E—well above its historical average of 17X. Even with robust earnings growth of 11% in 2025 and another 7% in 2026, applying a 17X multiple to projected EPS of $288 gives a target of 4,896, implying 19% downside. Even at a higher 20X multiple, the target would be 5,760, for a 5.3% decline.

However, since my first stock purchase in 1996, I’ve learned two lessons: don’t fight the Fed, and don’t fight a bull market. With November’s unemployment rate rising to 4.2% and 355,000 fewer employed, the Fed is likely to cut rates again on December 18, which should support equities.

While I’m not eager to buy at these levels, I’m also not bearish enough to sell my current holdings. Instead, I’m focusing new investments on residential commercial real estate for better valuations and better upside.

For fun, multiply your stock investments by 7%—the average 2025 upside—and imagine how much richer you could be. Then ask yourself: Do you work harder, or relax more, knowing your money is growing for you?

For a detailed look at 2025 projections, including my own analysis, check out: 2025 Wall Street S&P 500 Estimates.

Have a Financial Plan and Stick to It

The more educated you are about your finances, the wealthier you’re likely to become. But knowledge alone isn’t enough—you need a solid financial plan and the discipline to stick with it over the long haul. That’s why I’m excited to revisit the Boldin Financial Planner (new post), which has rolled out impressive new features. Built from the ground up in 2015 with retirement planning in mind, Boldin continues to be a standout tool.

As someone now just 13 years away from the traditional retirement age of 60, I’ve started to take tax-efficient withdrawal strategies more seriously. My father, now 79, warned me about Required Minimum Distributions (RMDs) years ago when he faced them himself. Back then, I didn’t pay much attention. Now I do—and you should too.

If you haven’t built up a Roth account yet, now may be the time to start contributing or converting funds. With the Tax Cuts and Jobs Act set to expire at the end of 2025, there’s a strong chance it will be extended in 2026, possibly with further tax cuts. However, after 2029, the tax landscape could shift dramatically depending on who’s in power.

We’re in one of the most bullish times again. Even with a conservative financial plan, you’re probably earning far more than anticipated. Let’s appreciate this period of good fortune, but stay prepared for the unexpected.

If you’re looking for a robust financial planner, Boldin offers both a free version and a PlannerPlus version for just $120/year—a fraction of the cost of hiring a financial advisor. One of their most helpful features is their Roth Conversion Explorer, which helps you figure out whether you should convert and how much to save on future taxes. 

Boldin Roth Conversion Explorer

Take control of your financial future and sign up with Boldin today.

To Your Financial Freedom,

Sam

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