2023: Year-End Planning Guide



The end of the year is approaching fast – and it’s been one for the books. As 2023 draws to a close, we continue to see an upward trend in many areas of the U.S. economy:

  • The stock market rebounded from its double-digit decline in 2022. In fact, as of mid-October, the S&P 500 was up by double digits for 2023.
  • Fixed income is once again a viable alternative for investors, with yields having risen to their highest levels in over a decade.
  • The employment rate is stronger than anticipated – 60.40% at the end of September versus 51.30% in April 2020.
  • Mortgage rates may be up, but most homeowners took advantage of the low rates available from 2009-2020. In fact, 40% of U.S. homeowners are mortgage-free, and monthly debt payments as a percentage of disposable income are below 10% (versus 10-13% in the 1980s and 1990s).
  • The pandemic, while still not completely eradicated, is no longer the primary topic of conversation around the dinner table, and dinner is being served increasingly in restaurants… inside.

And yet, we can’t help but be cautious about the year ahead. While the economy appears to be tracking towards a soft landing, recession is not out of the question; however, neither is continued recovery. Inflation has increased the price of gas, groceries, and other goods, while the Federal Reserve (“Fed”) has raised interest rates to their highest level in 22 years with no guarantee that it will not raise rates further to combat inflation. In addition, U.S. trading patterns are not what they were. 

For example, who do you think is our biggest trading partner? If you answered China, you are probably not alone, but you are not correct either. Our biggest trading partner is now Mexico, and while China remains a critical supplier and purchaser of goods and services, its economy has been under well-publicized pressure this year. More alarming is the ongoing war in Ukraine and the recent war in the Middle East.

Take all this into consideration, and you can see how critical it is that you have advisors who can help you understand and navigate the conflicting forces that characterize our current environment. 

At Lenox Advisors, we are committed to helping you do just that. We urge you to stay in close touch with your advisory team and contact us with any questions you might have about any of the topics covered in the following pages.

Legislative changes that may affect your finances

The SECURE Act 2.0 that was passed by Congress at the end of 2022, followed up the SECURE Act 1.0, that was passed in 2019. Both Acts provide Americans with greater opportunities to save more for retirement.

SECURE Act 2.0 (Setting Every Community Up for Retirement Enhancement) was passed at the end of 2022, following SECURE ACT 1.0 — Both Acts provide Americans with greater opportunities to save more for retirement. However, several tweaks were made to this legislation recently that may affect your planning efforts.

Did you inherit an IRA?

If so, you are subject to different rules depending on:

  • Whether the original owner of the IRA passed away before or after 2020.
  • Whether the original owner of the IRA was your spouse or another individual.

If you inherited a tradional IRA from a spouse, you may be able to treat it as your own. Your assets in the plan can continue to grow tax-deferred, and you will not have to take annual Require Minimum Distributions (RMDs) until you reach the following age:

  • Age 73 if you’ve turned age 72 in 2023.
  • Age 74 if you were born between 1951 and 1950.
  • Age 75 for if you were born in 1960 or later.

If you inherited the IRA from another individual — a parent or sibling, for example – the rules are more complicated. You may not have to take RMDs every year, but you must deplete the assets in the IRA within 10 years after the death of the original owner.

Here's where it gets even more complex.

In 2022, the IRS proposed regulations that differed depending on whether the original owner of your inherited IRA passed away before or after they were required to take annual RMDs. The proposals led to confusion among legislators and tax professionals that prompted the IRS to take a time out and waive any penalties for not taking RMDs from an inherited IRA in 2021, 2022, and 2023. Clarification is expected in 2024. Stay in touch with your advisory team to determine how or whether you may be affected.

Do you plan to leave a traditional IRA to your children or other heirs?

As you can see, the rules to which your heirs will be subject are complex. More important, however, is whether an inherited IRA will present your heirs with a windfall or an albatross. Consider that the distributions they take during the 10 year period mentioned above will be taxed at ordinary income tax rates. Depending on your heirs’ financial situations, these distributions may increase their overall federal and state tax brackets, thereby increasing taxes on all their income.

Talk to your Lenox Advisor about possible solutions that might prove more tax-efficient.

Are you eligible for Catch-Up Contributions to a 401(k), 402(b), or 457(b) Plan?

Currently, you’re allowed to contribute a maximum of $22,500 a year to these plans, plus an additional $7,500 catch-up contribution if you are 50 years of age or older. In 2024, catch-up contributions will become even more generous for some plan participants. Consult your Lenox Advisor for more information.

Have you established 529 plans for your children or grandchildren?

If so, you will enjoy greater flexibility than was available in the past. Beginning in 2024, any assets in a 529 that are not used for education expenses will be able to be rolled over to a Roth IRA (up to a lifetime limit of $35,000). In other words, even if a child doesn’t end up going to college, they will get a meaningful head start on retirement savings and a solid financial future. One important caveat, however, is that to take advantage of this benefit, your child must be the beneficiary of the 529 for at least 15 years – another good reason to get started as soon as possible after the child in your life is born.

Mitigating Risk

As 2023 draws to a close, we’ve identified several areas of concern that, if left unaddressed, could pose substantial risk.

Can you still afford or even obtain Property and Casualty Insurance?

According to the National Association of Insurance Underwriters (NAIC), “The property and casualty insurance industry has faced one of the toughest operation environments in recent years, with rising losses stemming from inflation, supply chain issues, and natural catastrophes.”1

Premiums have risen substantially in some areas of the country, and, in fact, even people who do not live in those areas may be finding themselves charged with higher premiums. In addition, some carriers are no longer offering coverage in areas plagued by catastrophic fires, floods, tornadoes, and other natural disasters.

At Lenox Advisors, we work with multiple insurance carriers to provide our clients with protection from minor mishaps, as well as major losses. We also help clients choose policy features they may not have thought about on their own. For example:

  • Will you receive replacement costs for any losses you incur or only actual cash value that factors in the depreciation of your affected property?
  • Does your coverage offer protection for all risks or only those stipulated in your policy?
  • What about floods? Most homeowners policies only offer limited coverage.

​In short, we are focused on helping you obtain the right protection at a reasonable cost and can serve as an ongoing source of counsel as your needs change and the insurance industry offers more, fewer, or different choices.

Are you concerned about Cybercrime?
If so, you’re not alone. Americans lost more than $1.3 billion to Internet crime last year, and even those who have not been victimized are concerned that they might be. Consider that:

  • 92% of Americans are concerned about a cyber breach.
  • 56% don’t know what steps to take in the event of a data breach.
  • 422 million people had their data compromised by cybercriminals.

Technology has become an integral part of our work and personal lives. At the same time, cybercriminals have become more sophisticated and adept at hacking accounts, stealing identities, and extorting with sophisticated ransomware. NFP Corp. has recognized the need for protection against this rapidly growing threat and offers cyber solutions that encompass:

  • Account takeover and compromise
  • Identity theft
  • Smart home device breaches
  • Cyber harassment and bullying

These solutions include Digital Shield, a proprietary cyber product designed to protect you from the rapidly growing threat of cybercrime. Digital Shield goes beyond technology to offer personalized, proactive assistance in the event you are a victim of cyberattacks, ransomware, identity theft, cyberbullying, or reputation coverage. Contact your advisory team for more information.

Does your homeowners and auto insurance coverage provide you with sufficient liability protection?

Climate change and inflation aren’t the only reasons for rising insurance premiums. Our society has become increasingly litigious, and especially vulnerable are those who have the most to lose.

Personal Excess Liability Insurance can make all the difference if allegations of bodily injury or property damage put your assets and reputation on the line. This type of coverage typically applies once you’ve exhausted the liability coverage on your home or auto insurance policy. It protects you from loss in all liability situations, not just auto accidents, and can sometimes make the difference between maintaining and dramatically diminishing your overall net worth.

As our client, you are eligible to participate in a group excess liability program that offers higher limits of coverage at discounted rates. Coverage is worldwide and extends to an unlimited number of homes, vehicles, drivers, and watercraft. What’s more, new acquisitions are protected immediately at the time you purchase them and won’t impact your current premium.

Will the “Long-Term Care Tax” be Coming to Your State Soon?

Many states are now realizing how important Long-Term Care (LTC) planning is, and are implementing a so-called Long-Term Care Tax (LTC Tax). Recently, Washington State became the first state to implement this tax; 12 other states are currently considering it.

To avoid this proposed payroll tax, you must show evidence that you own a long-term care policy. Considering the lack of coverage offered by proposed state programs and the reduction of take-home pay you will incur because of any legislated payroll tax, now may be a good time to look into the wide variety of long-term care policies available in today’s marketplace. Many offer not only meaningful protection, but the flexibility to leave your loved ones a death benefit in the event you don’t require all your coverage for long-term care expenses.

1 National Association of Insurance Underwriters (NAIC), US Property and Casualty and Title Insurance Industries-2022 Full-Year Results.

Review Your Employee Benefits

Too many people stop thinking about their employee benefits after they sign up for them initially until they need them. Take the time to review the following benefits and make certain they are providing you with ample protection:

  • Health Insurance: Are you enrolled in a High Deductibility Health Insurance Plan or a Preferred Provider Organization (PPO)? Are you aware of the differences? PPOs offer greater flexibility, while High Deductibility Plans generally offer lower costs provided you don’t have medical conditions that necessitate numerous visits to doctors or hospital stays. For more details about how these plans work, consult your human resources professionals or your advisory team.
  • Group Life Insurance: For many employees, group life insurance is offered as a complementary or low cost benefit. As a result, it’s easy for many group life participants to believe they are adequately covered and don’t require their own possibly more expensive life insurance policy.

The questons to ask yourself are:

  • How much coverage do you actually have, and is it enough to help your family achieve their goals and maintain their lifestyle?
  • What happens to your coverage if you retire or leave your employer?
  • How much would it cost to purchase an individual policy that provides your family with adequate protection?

Your Lenox Advisor can help you answer these questions and determine whether you should consider your own policy as a replacement or complement to your current group coverage.

  • Disability Insurance: If you’re fortunate enough to work for an employer that offers a long-term disability plan, it’s essential for you to know the following:
    • ​How much your policy will pay if you’re out of work? Do your disability benefits equal your total compensation or only a percentage of your base salary? Will those benefits cover not only your monthly spending but your college savings and retirement contributions?
    • Is your disability insurance portable? If you leave your employer, can you take it with you?
    • Are your disability benefits taxable? They are if your employer pays for the insurance premiums on your behalf or if you pay for them with pre-tax dollars (some employers offer that choice).

Clearly, it pays to consult with your plan administrator to determine exactly what your coverage does and doesn’t provide. Armed with this knowledge, you can work with your Lenox Advisor to determine whether you should own your own disability policy in addition to the group coverage offered by your employer.

  • Dental and Vision Insurance: Open enrollment is typically available at the end of each year. If your employer offers this coverage, try to assess whether you will need it next year and to what extent

Managing your Assets

As year-end approaches, it may be beneficial for individuals to review their portfolio, reevaluate their goals, assess their risk tolerance, and consider their future liquidity needs.

Not too long ago, a number of financial pundits were claiming that the 60-40 portfolio was dead. After all, why would you allocate 40% of your portfolio to fixed income when yields were close to zero, and the Fed was raising interest rates on an alarmingly regular basis? Indeed, 2022 was one of the worst years for fixed income in recent memory, and the stock market’s performance was even more dismal. Specifically, both the S&P 500 and the Bloomberg Aggregate Bond Index were down 18% and 13%, respectively, for the year – the first time since 1969 that both stocks and bonds suffered losses.

What’s Changed?

For one thing, bond yields rose considerably over the past year. Higher yields help buffer the deleterious effect of interest rate increases on bond prices, and, in fact, yields are now higher than the inflation rate – a phenomenon that at one time was not a phenomenon at all. Before the 2009-2010 recession, it was normal for savers and investors to expect that they would make money on fixed-income and cash holdings.

Still, there is another side to what seems like a return to normalcy. Higher interest rates mean higher borrowing costs for companies, consumers, and governments. They are also the weapon that the Fed uses to combat inflation, which is still with us, although it appears to be slowing. In addition, the current environment is being interpreted differently by different investors.

For example, employment numbers are strengthening, and the fact that employers are hiring and paying higher wages can be construed as good news, or it can be just the opposite for those who see it as a sign of continued inflation and a need for higher interest rates to slow the economy.

What about Stocks?

2023 has seen investors shift from euphoria to anxiety as markets experienced an early year tech rally, a cyclical rally over the early summer, and more recently, a downturn stemming from debt ceiling issues and the Fed’s persistent focus on inflation.

One thing is increasingly clear: the rising tide that lifted all boats when interest rates were near zero is no longer with us. For the first time in over a decade, conversations among many financial professionals and their clients have turned from “What indexes should you invest in?” to “What stocks are in those indexes?” In other words, selectivity is now critical, and active portfolio management is seeing success.

According to Forbes, only 9% of actively managed mutual funds aspiring to outpace the S&P 500 actually succeeded over the past 10 years. By the end of the first quarter in 2023, however, 49% of those funds were able to outperform the market over the previous one-year period. In short, exposure to investment categories via low-cost index funds, ETFs, and other vehicles continues to be important but should now be coupled with choosing the right companies to improve success.

To illustrate this point, look at the group of stocks that some call “The Magnificent Seven” – Apple, Microsoft, Amazon, Meta, Nvidia, Alphabet, and Tesla. While this group has performed well, it might be advisable to remember the original Magnificent Seven movie and the film on which it was based, The Seven Samurai. In both movies, only three of the seven survived.

What now?

A 60-40 asset allocation is once again showing signs of life. In fact, it might be ideal for your specific goals and risk tolerance. Or it may not be. Your allocation should reflect your goals, time frame, and risk tolerance, as well as prevailing market and economic conditions. In this environment, it is especially important that you stay in close contact with your advisory team so that we can help you structure a portfolio that is better positioned to meet the challenges we foresee in 2024.

Going beyond asset allocation

Asset allocation, the practice of diversifying an investment portfolio among asset classes, is considered by many to be the most important determinant of portfolio performance.

Since the concept was first introduced, however, the investment environment has changed dramatically. An effective asset allocation must consider far more than how much of your assets should be invested in stocks, bonds, or cash.

The chart below is used by Lenox Advisors to explain an important investment concept to clients. As you’ll see, the inner circle of the chart contains four segments, each of which is assigned a different color. Let’s take a closer look at each segment.

Green for Growth

Growth has traditionally been represented by stocks, and chances are, your portfolio contains what you might believe to be ample diversification of these investments – mutual funds, individual stocks, and target-date funds, for example. In our opinion, however, diversification must go much further. Look at the green band that is concentric to the growth segment of the circle. As you’ll see, it is divided into three more segments – liquid equity, illiquid equity, and human capital. Liquid equity is further divided into such segmentsas Domestic and International, while Illiquid is divided among Private, Units, and Carry. What does all this mean?

Simply ask yourself the following questions:

  • Does the liquid portion of your equity allocation include international, as well as domestic stocks? What about emerging markets, as well as their developed counterparts? Ideally, your allocation should consist of various asset classes that don’t all perform similarly. You may not want to invest in all these categories, but you should make certain this portion of your portfolio is amply diversified and that your allocation changes from time to time to align with your overall investment strategy.
  • If you are invested in foreign equities, are you aware of the currency risks involved and how to mitigate them?
  • If you own any illiquid equity, are you putting all your investment eggs into one type of basket – say, a Private Equity Fund? Or are you participating in different types of programs?
  • Human Capital applies primarily to corporate executives whose wealth is often overly concentrated in the stock of their employers and the estimated duration of their careers. If that’s the case, should you be doubling down on your investment by purchasing stocks of companies in the same industry? The same goes for business owners who might want to think twice about investing in companies like theirs that are subject to similar market forces. Now that you have the idea look at the other segments of the circle.



Blue for Stability

Investments categorized as Stability may include bonds, structured products, and other loan-based and/or income-generating vehicles.

All bonds are not alike. Look at the Fixed Rate segment of the circle, for example, and notice that it includes not only Treasury securities, but corporate bonds, high-yield bonds, mortgage-backed securities (MBS), etc. This doesn’t mean you should include all these categories of fixed-rate securities in your portfolio, but it does mean you should be aware of what’s available and which might best meet your overall goals, time frame for reaching those goals, and risk tolerance.

Purple for Prinicpal

Principal refers to the portion of your overall wealth that you are counting on to meet future expenses or provide you and your family with financial security. As you can see, your pension (provided you have one) is an example of this type of wealth component. Other possibilities may include whole life insurance policies, cash balance plans, and certain types of annuities that offer greater certainty to your balance sheet or cash flow projections.

Gold for Liquid

This is the portion of your portfolio typically labeled as cash. It represents assets you can access immediately when you need them without selling securities and worrying about price fluctuations. You’re probably already familiar with Certificates of Deposit (CDs) and money market funds, the most widely known type of cash equivalent, but other vehicles are available as well, and may better abate inflation’s risk to your purchasing power.

What Else Should You Be Aware Of?

The non-colorful part of the chart contains a number of concerns that you should think about addressing in your investment strategy. One of the most important is taxes. Even a seemingly sound investment program can be sabotaged by not only what investments you select, but where you keep them. Tax-free assets like municipal bonds, for example, should be kept in a taxable account, not an IRA. Corporate bonds or other assets that generate taxable income might best be placed in an IRA, so you can defer taxes until you make withdrawals at retirement. Conversely, assets in a Roth IRA are allowed to grow tax-free, so you should consider investments that you believe are poised for growth over time. As our client, you benefit from our tax-conscious approach to investing, that is designed to reduce tax liability and increase your after-tax return.

6 Ideas to Consider

Our goal is to engage in conversations that help people refine their planning approach. This can involve considering new ideas that potentially save on taxes or enabling them to better achieve their visions for their legacy. Whatever it may be for you, we hope this “Ideas” section is a valuable resource.

  1. ​Use Losses in Your Portfolio

Active portfolio management not only involves selecting securities poised for potential growth and/or income, it also entails strategies to help you reduce your tax liability and increase your after-tax returns.

Tax-Loss Harvesting, as its name implies, uses losses in your portfolio to offset gains for tax purposes. Here’s an example of how it might work:

  • You’re in the 35% income tax bracket and are subject to a 20% capital gains rate.
  • You own a stock that has appreciated $15,000 from the time you bought it several years ago.
  • You also own a stock that has declined in value by $16,000 over a similar time period.

You sell both positions and use the loss in one to offset the gain in the other for tax purposes.

  1.  Avoid Tax Liability on Appreciated Stock Position

If you still have appreciated stock positions in your taxable accounts and wish to sell them, consider contributing them to a Donor Advised Fund. You get an immediate tax deduction and gain access to experienced professionals who can help you identify suitable candidates for charitable contributions and determine how your contributions are actually being used.

  1.  Consider Permanent Life Insurance for Its Tax Diversification Benefits, as well as Protection Feature

Life insurance is first and foremost about protection — helping loved ones carry on in the event of an untimely passing. But some types of permanent life insurance, such as whole life insurance, have tax-advantaged features that can complement retirement savings vehicles. 

Permanent life insurance builds cash value over time.

  • In the case of whole life insurance, the cash value grows at a rate guaranteed by the insurance company.
  • Other types, like variable universal life insurance, can earn returns based on the performance of investment accounts.
  • Additionally, some life insurance policies are eligible to receive dividends, which can add to the life insurance protection and cash value as well.2

Cash value grows on a tax-deferred basis, which means the question of taxes doesn’t come up until the value is accessed. How fast it grows depends on the premium plan involved.

This protection, combined with accumulation and access features, makes whole life insurance a useful option as a complement to an overall savings and investment strategy and provides for additional tax diversification of income sources.

  1.  Prepare for Estate Taxes

The end of 2025, when a generous estate and gift tax break is set to expire, seems far off — but those looking to take advantage may be in poor shape if they delay action.

Currently, individuals can pass on $12.92 million without paying estate taxes, and married couples have a tax exemption for $25.84 million. Those amounts revert to $5 million and $10 million in 2026, or $6.46 million and $12.92 million after adjusting for inflation. Certain types of trusts can provide tax-minimizing strategies, and you should consider integrating these tools into your existing estate plan now.

2 Dividends are not guaranteed. Access to cash values through borrowing or partial surrenders will reduce the policy's cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

  1.  Take Advantage of Estate Planning “Freebies"

What’s an estate planning freebie? It’s an action you can take to reduce your estate without using your lifetime exclusion. For example, you can pay a grandchild’s tuition by sending a check directly to their college or private school. Or you can help a family member meet medical expenses by sending a check directly to their healthcare provider.

  1.  Aggregate Your Account Information in One Convenient Place

If you’re like many of our clients, you probably maintain relationships with multiple financial services firms – banks, mutual fund companies, insurance providers, etc. The question is whether the strategies employed by these advisors cover all your concerns and work in concert, not at odds with each other.

As our client, you have access to our state-of-the-art account aggregation website that enables you to view all your account information in one convenient place. By taking advantage of this invaluable resource, you gain the following advantages:

  • Strategies that work together — Does the gifting program you established for your children come at the expense of your retirement aspirations? What about that IRA you established years ago – is its asset allocation consistent with your current needs? Aggregating your account information gives both you and your advisory team a complete view of all your finances. As a result, both you and they will have the information required to make more proactive and informed decisions.
  • Your family will thank you someday — No one likes to think about it, but if something were to happen to you, would your family know where your assets were? Would they be able to turn to a trusted advisor for help in sorting out financial issues and facilitating the transfer of wealth according to your wishes and as expeditiously as possible? Whether your family members are well-versed in financial matters or lacking the experience to manage substantial assets, they can benefit greatly from an aggregated approach.
  • Your advisory team — We believe that our clients can best be served by knowledgeable advisors who have all the information they need to provide sound financial guidance. Your team is always available to answer your questions, help you formulate strategies to reach your most important goals, and evaluate your progress over time.


Make Lasting Changes Before 2024

Some of the ideas we’ve presented are more effective when implemented before the end of the year. Others are complex and may require multiple conversations with your advisory team. Get started now and talk with your team about ideas that might help you manage your finances more effectively in 2024 and the years beyond. Your team is always available to provide you with guidance that encompasses not only your investment and insurance needs, but virtually every aspect of your financial life.


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