💰 5 Fact Friday: How To Prep Your Portfolio For Rate Cuts

INVESTING
1. How To Prep Your Portfolio For Rate Cuts 🔑

The Fed’s first rate cut is widely predicted for the September 17th meeting. While everyone’s buzzing about the potential pivot, let’s talk strategy.

Rates took the elevator up but are expected to take the escalator down. So, what’s a smart investor to do before this new cycle kicks off?

Here are five money moves to consider:

1. Lock in Those Yields (Before They Disappear)
The yield curve has been inverted since 2022, with short-term yields higher than long-term ones. But as things return to “normal,” longer-term bonds should start paying more.

Now is the time to build a bond ladder: stagger your cash into short-, intermediate-, and long-term bonds. This strategy helps reduce reinvestment risk while also keeping some liquidity on hand.

2. Keep Your Credit Score in Fighting Shape
If you’ve been waiting for a good refinancing window, this could be it. But remember—the savings need to outweigh those pesky closing costs. So don’t jump the gun too early. Start polishing your credit score now, so you’re ready to move when rates drop enough to make refinancing worthwhile.

3. Don’t Get Suckered Into Mortgage Points
If you’re house hunting, skip the mortgage points for now. Rates are likely coming down, which means refinancing could be in your near future. Paying upfront for a lower rate might not be worth it if you end up refinancing in a year or two anyway.

4. Diversify Your Fixed Income Like a Pro
No one’s got a crystal ball, so cover your bases by diversifying fixed-income maturities. Mix up your short- and long-term bonds, CDs, or treasuries. That way, no matter where rates head, you’ll be locking in decent returns as your investments cycle through.

5. Lean Into Dividend Stocks and REITs
When rates drop, dividend-paying stocks, utilities, and REITs typically see a boost as income investors start chasing yield. Consider upping your allocation to these assets.

The bottom line? Rate cuts might be coming soon, but there is still time to position yourself wisely. Stay flexible, diversify, and be ready to act when the Fed finally begins its next chapter.

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REAL ESTATE
2. Are Solar Panels Worth It? ☀️

As utility bills keep climbing, solar panels are popping up in neighborhoods everywhere. But are they worth the hype—or the cost? Let’s break it down.

The average residential solar setup runs about $25,000, but costs can range from $18,000 to $37,000 depending on where you live, your home’s sun exposure, and the type of panels you choose.

The good news? There are plenty of ways to finance this upgrade, whether through a loan, lease, or PPA (power purchase agreement).

Federal tax credits and state incentives can also knock off a chunk of that cost. However, those tax credits only apply if you own the system. Leasing or entering a PPA means you’ll avoid upfront costs, but you won’t get the tax breaks or own the panels.

Once you buy, though, maintenance is relatively low. Expect to pay between $150 and $750 annually for cleaning, plus occasional tree trimming to keep those panels soaking up the sun.

For solar to truly pay off, you need to stay in your home long enough to recoup the costs through energy savings. If you plan to sell before hitting that break-even point, getting your investment back could be trickier—unless the buyer is willing to pay a premium.

Luckily, homes with solar systems do sell for about 4% more—around $17,000 extra on a median-priced home—so there’s some built-in value.

The Takeaway

Solar can be a great long-term play if you plan to stay put and have the right setup. Just be sure to get multiple quotes, negotiate, and factor in potential maintenance costs.

Pro Tip: Use Google’s free Project Sunroof tool to estimate your potential savings based on your exact address. Just enter your address and average electric bill to see your home’s potential!

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PERSONAL FINANCE
3. The Most Affordable Places To Live 🏠

If you’re looking to stretch your dollars further, a new ranking by U.S. News highlights the 25 most affordable cities in the U.S. for 2024.

The list considers key factors like housing costs, utility bills, and how much of your income goes toward daily expenses.

The top spot goes to Fort Wayne, Indiana, where residents spend just 19.56% of their income on living expenses. Other highlights include Huntsville, Alabama, known for its low housing costs, and Wichita, Kansas, where you’ll find a blend of small-town charm and big-city amenities at a fraction of the usual price.

The ranking reveals that affordability isn’t limited to small towns—mid-sized cities like Green Bay, Wisconsin, and Louisville, Kentucky, also made the cut thanks to low housing costs and vibrant local economies.

For those considering a move in 2024 or 2025, these cities offer more than just lower expenses—they also bring quality of life, community, and culture without breaking the bank.

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TAX
4. Key Tax Strategies Before TCJA Ends ⏳

The Tax Cuts and Jobs Act (TCJA) of 2017 was one of the biggest tax code overhauls in decades. It slashed tax rates, increased the standard deduction, and provided breaks to both businesses and individuals.

However, most of the individual tax cuts are temporary and set to expire at the end of 2025.

Could the presidential election change that? It’s possible.

Democrats largely oppose extending the policy, viewing it as a gift to the wealthy. Republicans, on the other hand, support it as a boost to GDP growth, job creation, and taxpayers’ wallets.

For now, though, the tax benefits will sunset in less than two years. This will lead to several key changes:

• Higher marginal tax rates

• Lower standard deductions

• Higher mortgage interest deductions

• The State and Local Tax (SALT) deduction will be uncapped

• The Qualified Business Income (QBI) deduction will be eliminated

So, what should you do now and in 2025? Here are a few key strategies to consider:

1. Accelerate Income: Realize income in 2024 or 2025—by exercising stock options or taking early distributions from retirement accounts—to shift your tax burden to the “cheaper” years.

2. Roth Conversions: Convert traditional retirement savings to Roth accounts to lock in lower rates.

3. Harvest Capital Gains: Sell investments with significant gains before higher rates kick in.

4. Delay Harvesting Capital Losses: Hold off on recognizing losses if they’ll be more valuable in a higher-tax environment.

5. Defer Itemized Deductions: Delay deductions like charitable donations or medical expenses to maximize their impact under higher rates.

6. Maximize Gift Exemptions: For larger estates, use the current higher estate and gift tax exemption before it’s halved. Making significant gifts before 2026 could save your heirs from substantial future taxes.

The TCJA’s sunset will mean a tax hike for many, so acting now is key. Plan ahead and make the most of today’s tax breaks before they’re gone.

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PERSONAL FINANCE
5. Tips To Maximize Your FDIC Coverage 🛡️

The Federal Deposit Insurance Corporation (FDIC) was established in 1933 to protect your hard-earned cash in case your bank goes belly up.

If your bank is FDIC-insured, your deposits are automatically covered up to $250,000 per depositor, per ownership category.

What Does FDIC Insurance Protect?

• Checking accounts

• Savings accounts

• Money market deposit accounts (MMDAs)

• Certificates of deposit (CDs)

• Cashier’s checks and money orders

So, your regular bank deposits are safe and sound.

What Does FDIC Insurance NOT Protect?

• Stocks, bonds, and mutual funds

• Crypto assets

• Annuities and life insurance policies

• Municipal securities

• Safe deposit box contents

If you’re investing or storing gold bars in a safe deposit box, you’re on your own.

How Can I Maximize My Protection?

• Use Different Categories: Individual accounts, joint accounts, and accounts with beneficiaries each get separate $250,000 coverage. For example, $250,000 in an individual account and another $250,000 in a joint account are both fully insured.

• Spread It Out: Keep your deposits under $250,000 per bank and ownership category. If you’ve got more cash, spread it across different banks.

How Fast Do I Get My Money Back if a Bank Fails?

Quickly! The FDIC usually pays depositors within a few days—typically the next business day. You might get a new account at another insured bank or a check for your insured balance.

Why Should I Care?

Since its inception, no depositor has lost a single cent of FDIC-insured funds. It's like a financial security blanket, ensuring your money is safe even if your bank isn't.

Not sure if your bank is FDIC-insured? Use the BankFind Suite to double-check.

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