The job situation report released this morning by the U.S. Bureau of Labor Statistics (BLS) was a good surprise, and the stock market closed at a record high this week. Amid the boom, however, as the economy recovers from the Covid crisis, it’s wise to consider what could go wrong.
First the good news: Total employment rose by 916,000 in March, much higher than the 625,000 net new jobs expected by economists. The jobs recovery is stronger than expected, reflecting better than expected vaccination rates.
With three million Americans vaccinated daily in recent days, March went out with a roaring jobs boom that knocked the unemployment rate down to 6%, from 6.2% in February, 6.3% in January, and 6.7% in December.
“These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic,” according to a BLS press release.
The stock market was closed today for Good Friday. The Standard & Poor’s 500 stock index closed Thursday at an all time high of 4,019.87. The index gained +1.18% from Wednesday and +1.13% from last Friday’s close. The S&P 500 index is up +56.97% from the March 23rd bear market low.
With the economy recovering faster than expected and the stock market repeatedly hitting record new all-time high prices, it’s wise to consider what could go wrong, what could risk your retirement and how much is left for your family upon your demise.
Black swan events, like a pandemic, natural disaster, terrorism, or other game-changers are always possible. By definition, you cannot plan for black-swan events. They’re unforeseen, unknown risks that blindside the world. But you can plan on black swans happening. Another financial risk high net worth and high-income individuals are facing right now is higher taxes.
Taxes are a known risk for individuals with more than $400,000 of adjusted gross income. A 6.4% federal tax will be levied on income in excess of $400,000, under President Biden’s proposal. In addition, the estate tax exemption of $11.58 million for individuals, under President Biden’s plan, would be slashed to $3.5 million, subjecting millions of heirs to haircuts on their inheritances. These two taxes might be less damaging by acting now. Amid the economic boom, financial planning is more important because the stakes have been raised by threat of higher taxes.
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