How are those predictions going for you?

Every year the CFA Society of Mississippi hosts economic and investment experts from around the country to prognosticate about the future at the Forecast Dinner. While nobody (not even these experts!) has a crystal ball, the exercise can be amusing, intellectually stimulating and sometimes yields surprising insights!

This year carried a positive message of resilience in the American economy and global stock markets but there was one large blind spot.

What did they miss? The Forecast Dinner took place mere days before the US launched attacks on Iran - nobody specifically predicted this. There was, however, a salient observation when Bob Carney noted that "we are not as vulnerable to energy shocks in the Middle East." Net imports of oil have been declining in the US since around 2005 and in 2020 we became a net exporter of oil. That being said, oil is a global commodity and the price here is impacted by events around the world.

While we are unlikely to run out of oil, we will still bear higher prices as the war drags on. Before the Forecast Dinner, oil was comfortably in the $60 range. Last week it spiked as high as $120. This means higher gas prices which mean higher prices for every product that needs to be delivered to store shelves or your door. On a recent road trip, I watched gas prices climb from around $2.50 to $3.50 as I drove the family to North Carolina.

Energy prices were in the spotlight even before the war as new data centers come online, using massive amounts of electricity. This surge in investment is balanced by the potential for increased electricity costs.

Is there a bright side to any of this? The overall message was positive. Specifically on the energy front, panelists noted that there was growing interest in alternatives like nuclear energy. This sort of investment takes a long time to turn into electricity generation. 

Besides the impact to our energy use, data centers have been the primary destination for investment in our economy. In 2025, it was estimated that $425 Billion would be invested in new data centers and up to $7 Trillion would be invested over the next 5 years! At the forecast dinner this was likened to the space race. These are real dollars being invested mostly by large companies with the cash flow to do this. While there is a speculative aspect of some of this investment, the dollars flowing are real.

Why is that investment important? Jack Manley noted that there were two basic levers we could pull to grow the economy: more people or better tools. AI investment promises better tools coming which is important as our population growth slows. Infrastructure investments such as those in the electric grid are also improving our economic tools.

What else drives the economy? Consumer spending makes the bulk of our economy. Tax refunds are up 10.6% this year thanks to some new deductions from the last tax bill. Most of that money is will end up spent soon in the hands of those lucky taxpayers. One risk is lower stock prices. Higher income earners account for 40% of spending, their spending comes from brokerage accounts so lower stock prices mean less consumer spending.

But what about the market? Over the past several years, the story was that the market was driven my the "Magnificent Seven" large technology stocks. While market concentration is a concern at any time, these companies were generating real profits and significant cash flows. There was substance under their dominance. Last year, that script flipped. In the US, smaller stocks performed well and have continued to lead this year. International stocks came out on top last year as lower valuations, positive growth and currency effects lead to higher market prices.

What is happening in the market now is the opposite of the concentration risk that dominated the story for the last few years. "Market rotation" refers to the positive sign of different groups of stocks in a diversified portfolio taking the lead as different sectors grow. While it is easy to look back over 15 years and see the dominance of large US stocks, the value of a diversified portfolio is keeping an investor from the worst years of any single asset.

What does this all mean for my portfolio? There was a question about gold. While it has performed well, they cautioned about thinking of gold as something that will make you rich - rather something that helps you stay ahead of inflation. We have used gold in portfolios very specifically to target uncertainty and volatility in the markets which aligned very well with the advice: “Do not lose sight of the role that Gold plays in your portfolio.”

If you missed the dinner, or just want see how the predictions have stood up these past few weeks, click here to watch the CFA Society of Mississippi's 22nd Annual Forecast Dinner.

Importance of Expense Ratios

 The research is clear. Fees are the biggest drag on investment returns. Advisor fees, commissions, annual fees, exit fees—all reduce an investor’s net. The best investment choice can see its value eroded by explicit and implicit fees.

Many investors opt for pooled funds (mutual funds, ETFs, annuities, separately managed accounts, even private equity funds), and these all have internal fees. We call this the expense ratio. It is measured as a percentage of the overall portfolio and occurs annually. Most of the fee goes to the fund manager but also covers administrative costs. Some ETFs have fees less than 0.10%, while some private equity funds have annual fees over 2.0%. It’s a wide range.

Earn 10% on your mutual fund in your 401k? Expect that number to be net of whatever the fund managers are charging. Maybe the underlying fund earned 11%, but 1% was carved out to pay that annual fee. The higher those expense ratios, the lower the net return. And this is the reason it is so important to pay attention to the expense ratios. 

Where can you find this number? Look in the prospectus for details on the fees. You should be able to find this document on the fund website. If the fund is in a 401k, it is probably in a tear sheet given to participants. You can look on sites like Morningstar.com for this information. If you are in a private fund, the fees should be in documents given to participants. If all else fails, call and ask, “What is your annual expense ratio?”

There are nearly 10,000 mutual funds, about 5000 US ETFs, and countless private equity funds. There is a lot of overlap so it makes sense to find the fund that fits your needs but also has the lowest expense ratio of any of its peers.

And many mutual funds offer a variety of share classes. Each fund is identical, as far as the underlying securities, but varies only by those expenses. Check the funds in your 401k and see if there are lower cost alternatives. If so, ask your administrator/trustee to see if such an option is available.

Expense ratios have been declining in recent years as competition has heated up. That’s good for investors. Imagine having a share class with a 0.75% expense ratio, while your friend owns the same fund with a 0.50% expense ratio. Think about the difference in 0.25% accumulated over 30 years and you can understand how important it is to focus on this fee. That difference could be in the thousands!

Certainly, there are other fees you might encounter, but internal expense ratios are some of the biggest. Look for that number and choose the lowest cost alternative available. There are real dollars at stake!

Beneficiaries: A Blueprint

It’s never too early to start estate planning. It may seem daunting, especially when considering who will receive your assets when you die. That’s why it’s important to understand the role of beneficiaries and how to designate them for all your pertinent assets and accounts.

Designating beneficiaries has complex tax and estate consequences and requires careful coordination with your entire estate plan. This is a general overview of beneficiary designations on investment accounts and is not legal, tax or investment advice. Work with the custodian of your accounts to designate or review beneficiaries

Who gets my stuff when I die?

Your estate plan determines that! But first off, it’s important to know what exactly a beneficiary is.

A beneficiary is an individual or entity/organization that you designate to receive your belongings or assets in the event of your death. It’s important to have one as it ensures your assets are distributed according to your wishes when you pass away. (ref. 1)

A beneficiary can be designated on retirement, brokerage, bank and other financial accounts. If you designate beneficiaries, that designation is unique to the account, avoids probate (which we will discuss in a later post) and supersedes your Will. 

It’s important to note that there are two types of beneficiaries when considering designations: primary and contingent.

What’s the difference between a primary and contingent beneficiary?

Generally speaking, a primary beneficiary is the first individual(s) to receive your account benefit upon your death. A contingent beneficiary is an individual or entity whom you choose to inherit your accounts/assets in the event the primary dies or elects not to inherit the assets (as shown below). (ref. 2)

What happens if I don’t choose a beneficiary?

If you die without having named a beneficiary on an IRA, your custodial agreement will determine who inherits the account. Typically, these agreements will designate your surviving spouse as your beneficiary if you are married at the time of death. If you are not married, your estate may automatically become a beneficiary of the IRA. For non-IRA accounts, whatever your Will says will determine how your assets are distributed. (ref. 3)

 

What about their children?

Generally, if you have multiple beneficiaries, Ann, Bob and Charles, and Charles dies before you, his share will pass to Ann and Bob (as illustrated in Fig. 1). Distribution options such as Per Stirpes and Per Capita will pass your accounts to your beneficiaries’ children (as in Fig. 2).

Per Stirpes or Per Capita can be defined in different ways depending on the custodial agreement or law, so take care to understand the implications of each designation. Discuss other arrangements with your custodian.

What about my IRAs?

IRAs and other tax qualified accounts are generally not subject to the terms of your Will. If you do not designate a beneficiary, the custodian, state or federal law may determine who inherits your account. It is important to designate beneficiaries to control who gets the account. Remember, inheriting an IRA may have significant tax consequences for your beneficiaries.

Designating beneficiaries has complex tax and estate consequences and requires careful coordination with your entire estate plan. This is a general overview of beneficiary designations on investment accounts and is not legal, tax or investment advice. Work with the custodian of your accounts to designate or review beneficiaries. 

 

Trust issues?

Establishing a Trust is another way to ensure that your assets are distributed the way that you wish. It is generally possible to have much more detailed instructions and name a trustee to exercise control over your assets after your death.  In particular, trusts are helpful for complicated assets (such as estate tax issues or property in multiple states) or complicated beneficiaries (such as minors, multiple families or beneficiaries who cannot handle their own finances).

In the case of an IRA or other tax qualified accounts, living individuals typically have the most flexible options. Trusts may be at a disadvantage when it comes to distribution options, taxes and general complexity. Take extra care when considering naming a Trust as beneficiary of your IRA.

Where can I read more? 

www.trustandwill.com

https://www.schwab.com/resource/titling-beneficiary

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[1] Julia Kagan, “What Is a Beneficiary? Role, Types, and Examples,” Investpedia, July 14, 2025, https://www.investopedia.com/terms/b/beneficiary.asp.

[2] “What is a contingent beneficiary? Making the right beneficiary choice matters,” Fidelity Investments, accessed December 1, 2025, https://www.fidelity.com/learning-center/smart-money/what-is-a-contingent-beneficiary.

[3] “Designating a Beneficiary for Your IRA,” Benjamin F. Edwards, Accessed November 17, 2025,https://www.benjaminfedwards.com/wp-content/uploads/2024/09/designating-a-beneficiary.pdf.

Planning on RMD income

It’s Required Minimum Distribution season and there are some important elements to understand before calculating and withdrawing funds from your IRA accounts. 

Throughout your career, you deferred taxes by putting money into your IRA or 401(k) accounts and now the time has come to pay the taxes. Your broker or financial advisor can help you calculate and withdraw this distribution. 

Your first RMD is generally when you turn 73. (If you were born on or after January 1, 1960, your first RMD is at age 75.) Figure I illustrates the RMD age for account owners.  

 

The RMD is the amount that you must withdraw from your tax deferred retirement accounts. RMDs are generally determined by dividing the account value as of December 31st of the previous year by the life expectancy distribution period of the calculation year as illustrated in Figure II. 

 

It’s important to remember that your first RMD is due April 1st of the year after you reach RMD age. But be careful – if you defer your first withdrawal, you will have to take two RMDs in that year. Only do this with careful thought and planning with your advisor. 

*Note: Your RMD calculation will be a little different if your sole beneficiary is a spouse who is more than 10 years younger than you. If this is the case, then you are required to use Table II (Joint Life and Last Survivor Expectancy) in Appendix B as shown in the IRS Publication 590-B (2024) (“Distributions from Individual Retirement Arrangements (IRAs)”). For the most part, this will result in a smaller RMD calculation than you would otherwise have. 

You calculate your RMD by dividing your account balance at the end of the previous year by the joint life and last survivor expectancy from Table II. 

For example: You have a traditional IRA with an account balance of $100,000 at the end of 2024. Your spouse, who is the sole beneficiary of your IRA, is 11 years younger than you. You turn 75 in 2025, and your spouse turns 64. You would use Table II. Your joint life and last survivor expectancy is 25.3, making your RMD for 2025 $3,953 ($100,000 ÷ 25.3). Source

Taking More than the Minimum 

You may take more than the minimum requirement. Using these accounts for income or covering large expenses is an important part of many people’s financial plan. You may be concerned about what the IRS might say, but do not worry. While the IRS requires a minimum withdrawal, they cannot tell you what your budget needs are or what your portfolio can sustain. 

What You Can Do with this Money 

Once you withdraw the money from the account, it’s just your money! You can do whatever you like. Spend it, save it, give it away! If you want to keep the money invested, move the cash to a taxable brokerage account (like an individual or joint account) and reinvest there. It can’t stay in the IRA. 

 

Taking Less 

If you decide not to take the minimum or more than the minimum, it’s most important to avoid taking funds below the minimum requirement. Leaving your RMD in the account may result in an up to 25% penalty tax on the amount not distributed. There are several ways to satisfy the RMD but simply moving it into another IRA or rolling one deferred account into another does not satisfy the RMD.  

While you can still convert your IRA to a Roth IRA, this does not satisfy the RMD either. If you are still working, you may be eligible to contribute to your IRA – this is allowed, but you must still take your RMD (as will be explored later). 

Taxation 

You’ve used this account to reduce your taxes in the past, and the IRS wants its cut. Withdrawals are taxable income that can push you into a higher bracket, raise Medicare premiums, and affect Social Security taxation. But if you don’t need the money, and want to send it to charity instead, you may be able to make significant savings with Qualified Charitable Distributions (QCD).  

Charitable Giving 

With the current standard deduction, fewer than 10% of tax returns are able to deduct charitable gifts. Qualified Charitable Distributions (QCDs) satisfy your RMD while excluding the gift from your adjusted gross income. If you do not itemize your deductions, you may be able to lower your taxes and still take advantage of the higher standard deduction. The money must go directly from the IRA to charity - work with your custodian or advisor to get this right. Figure III illustrates. 

 

Withdrawals from a pre-tax IRA, including your RMD, generally count towards your adjusted gross income (AGI). You are taxed on your AGI minus your deductions. If you do not itemize your deductions, you can reduce your AGI with a Qualified Charitable Distribution and still use the generous standard deduction. This reduces your taxable income and your total taxes owed. 

Multiple retirement accounts 

If you have multiple IRAs, you may be able to withdraw the total RMD from a single IRA. You must calculate the RMD for each eligible account. However, for 401(k)s and 457(b)s, you must take the RMD from each account. 

You may want to consolidate IRAs and other retirement accounts BEFORE the year you must begin taking RMDs to simplify the process. 

Inherited IRAs  

Beneficiary IRAs have more complex tax rules. If you inherit from a spouse, you can treat the account as your own. If you inherit from anyone else, in most cases, you must withdraw the account within 10 years and take RMDs each year until then.  It is important to both follow the rules and honor the memory of the person who left you an IRA. 

Thinking about distributions and taxes for your heirs is a big part of estate planning. Make sure that you review your beneficiaries as part of this process. 

Avoid RMDs with Roth Conversions 

Plan ahead to avoid RMDs with Roth conversions. Your Roth IRA is not subject to RMDs. Distributions to you or your beneficiaries are not taxable. By converting your pre-tax IRA to a Roth IRA, you will not have to take the RMD out. The conversion does count as taxable income, but this could potentially generate tax savings in the future. This requires careful planning as shown in Figure IV. 

You must satisfy your RMD before you can convert any additional funds. If you don’t, the funds can’t be converted to a Roth account where it would be tax free. This can be a big benefit to your beneficiaries who may face steep distributions in some of their highest earning years.