THE WEEK ON WALL STREET
Stocks finished the week mixed, bookending losses around midweek gains as investors digested fresh inflation data. The S&P 500 Index slipped 0.64 percent, while the Nasdaq Composite Index ticked up 0.34 percent. The Dow Jones Industrial Average dropped 1.82 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slid 1.48 percent.
FACT OF THE WEEK
One of the most important dates in the history of the United States of America. On this night, the Sons of Liberty dumped more than 300 crates of East India Company tea into Boston Harbor. To many who were still loyal to the crown, this was an act of sedition and treason by “ill designing men”. But to those whose loyalty to King George III—and his taxes—had faltered, this was a galvanizing event. Bostonians from all statuses and walks of life came together as equal citizens to make a peaceful protest against tyranny and taxation without representation. It was their patriotism that sparked the American Revolution.
MARKET MINUTE
Up and Down Week
Stocks fell broadly over the first part of the week. Leading chipmakers who produce semiconductors for artificial intelligence applications were under pressure after Chinese regulators announced an antimonopoly investigation. Investors breathed a sigh of relief Wednesday morning following news that consumer inflation in November was in line with expectations. Mega-cap tech stocks led the rally, with the Nasdaq closing above 20,000 for the first time. Meanwhile, the Dow fell as healthcare stocks came under pressure. Stocks remained in the trading range for the rest of the week on mild concerns about Thursday’s warmer-than-expected wholesale inflation report and a spending slowdown among lower-income consumers. The Dow registered its worst losing streak since 2020.
Final Fed Meeting of 2024
The consumer price index ticked up to 2.7 percent on an annualized basis in November, as expected. The market’s rally following the news reflected investor relief that inflation met expectations and that the increase from the prior month was slight. Those two factors may reinforce the belief that the Fed would follow through with the December rate adjustment, which it penciled in back in September. The bellwether inflation measure was the last critical data point before the Fed’s two-day meeting, scheduled to end on December 18.
FINANCIAL STRATEGY OF THE WEEK
Catch-Up Contributions
A recent survey found that 18% of workers are very confident about having enough money to live comfortably through their retirement years. At the same time, 36% are not confident. In 2001 congress passed a law that can help older workers make up for lost time. But few may understand how this generous offer can add up over time.
The “catch-up” provision allows workers who are over age 50 to make contributions to their qualified retirement plans in excess of the limits imposed on younger workers.
How It Works
Contributions to a traditional 401(k) plan are limited to $23,000 in 2024. Those who are over age 50 – or who reach age 50 before the end of the year – may be eligible to set aside up to $30,500 in 2024.
Setting aside an extra $7,500 each year in a tax-deferred retirement account has the potential to significantly increase the account's balance and, by extension, its income.
Catch-Up Contributions and the Bottom Line
This chart traces the hypothetical balances of two 401(k) plans. The blue line traces a 401(k) account into which $22,500 annual contributions are made each year. The red line traces a 401(k) account into which an additional $7,500 in contributions are made each year, for a total of $30,500 in contributions a year.
Upon reaching retirement at age 67, both accounts begin making withdrawals of $7,000 a month.
In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.