Read our last newsletter of 2023.

1. THE COMING
STORM
FLIPPING TRADITIONAL
BUDGETING UPSIDE
DOWN
IN THIS ISSUE
Quarterly Newsletter
Our insights on the markets, economy, and
financial planning
Q4 2023 NEWSLETTER VOL. 72
We Will Weather
the Coming Storm
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CLIENT SERVICE TEAM
FIVE INSIGHT TO
UNDERSTAND MARKETS
IN 2024
2034 is ten years away. This is the year that Social
Security’s combined trust fund is projected to become
depleted. In this year its income would be able to pay
only 80% of the scheduled benefits for its 80 million
beneficiaries. This means that if Congress has not
acted by 2034, beneficiaries will get an automatic
20% cut in benefits or the need to immediately
increase Social Security taxes by a whopping 25% or
some combination of the two. Important note: When
Congress reformed Social Security in the past, benefit
reductions were only applied to individuals not yet
eligible for benefits. Current recipients did not have
their benefits cut. This may be about to change.
Social Security was implemented in 1937 and was our
national commitment to every American who had
contributed to our country’s economy that they would
receive some income to support in their retirement. It
is not, however, a retirement account. The money we

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Financial Synergies Quarterly Newsletter | Q4 2023 2
pay into Social Security from our paychecks goes to pay benefits to our parents and
grandparents. It transfers money from the younger generation to the retired generation. This
model has existed in tribal societies for thousands of years where younger generations
provided for those who had grown too old or infirmed to contribute. When Social Security was
created, our country institutionalized this ancient model.
Since the early 1970’s, the differences between Social Security’s inflows (taxes) and outflows
(benefits) have varied a great deal but averaged about 3% more paid out than received.
However, since 2010, the trust has paid out 7% more in benefits than taxes collected. The
demographics are trending against the system as our birth rates continue to fall while life
expectancies have increased. It was as recent as 50 years ago that women started having
fewer children. Will this lower birth rate continue? Who knows, but I find it difficult to imagine
that parents are going to want to start having large families again.
The American Academy of Actuaries, who have been the primary whistle blowers on this
situation have projected some courses of action to resolve this coming mess. None of them
are pretty, but a gradual implementation of some or all of them would be the preferred method
helping the system survive as something close to its present form. Here are their top fixes
according to their projections. Spoiler alert: None of these truly fix the system.
Increase Payroll Tax By 25%:
This would raise the current 6.2% tax rate to 7.75%8 for both workers and employers, yielding
enough to pay 100% of benefits in 2034. Employee and employer payroll tax rates have never
been increased by more than 0.5 percentage points of taxable payroll in any one year, so
increasing the tax rate will be financially difficult for some people with very low income, unless
the EITC (Earned Income Tax Credit) is also increased.
Eliminate the taxable maximum ($160,200 in 2023):
This would require taxing ALL income and would avoid impacting low-income workers, but it
could be a large tax increase on high income workers (and their employers). It would not be
enough by itself, as it would cover only 78% of the 2034 shortfall, so additional changes would
still be needed.
Tax all earnings above $400K or increase the taxable maximum so that 90% of all
earnings would be subject to the payroll tax:
These two provisions would require a huge tax increase, but sadly would provide only 55%
and 36% respectively of the amount needed to pay all benefits in 2034 - additional changes
would be needed.
Tax investment income, estates and gifts, and earnings:
These additional sources of taxable income would represent a substantive change to Social
Security financing, needing a great deal of consideration, as none of these items has ever
been taxed for Social Security purposes. Taxing these items would further shift the nature of
the program away from individual equity and could meet considerable resistance.
Tax Social Security benefits more (like pensions):
This option would have no impact on the 2034 shortfall if enacted in 2034. If enacted today, it
would not help much - only 8% of the 2034 shortfall, because Social Security benefits are
already partially taxed. The federal income tax is progressive and has deductions, so there
would be little or no impact on low-income people.
According to the American Academy of Actuaries, “Congress will have more reform options if
they act sooner. Earlier action allows for tax increases and benefit reductions to be phased in
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Financial Synergies Quarterly Newsletter | Q4 2023 3
gradually and makes it less likely that a 25% payroll tax increase is needed in 2034. Earlier
action is also important to individuals, as it provides them with more time to plan and adjust to
the changes, enables them to make better decisions now and provides greater confidence that
they will receive their benefits. In addition, earlier action enables Congress to also impact
people over the next 10 years, so that benefit reductions can be smaller.”
The last time the trust funds were close to depletion was in 1983. The cash shortfall that year
was 1.0% of taxable payroll. In contrast, the expected cash shortfall in 2034 will be three
times as large (3.12% of taxable earnings, so paying all benefits that year will require much
larger tax increases and/or benefit reductions than in 1983.
If Congress cannot agree on Social Security reform until 2034, enacting benefit reductions for
only those who become eligible for benefits in 2034 or later will not help, so delay could force
them to increase Social Security taxes by 25% in 2034. That may be difficult, as Congress
may also need to enact tax increases to keep Medicare’s Hospital Insurance Trust Fund from
being depleted around 2031.
Regardless, you have an advisor on your side who can help navigate any changes that come
up. We will weather whatever storm, together.

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Financial Synergies Quarterly Newsletter | Q4 2023 4
Flipping Traditional Budgeting
Upside Down
by Rachel Buckhoff, CFP®
It’s a familiar story: it’s the end of the month, and you check your bank account, unsure where all the money has
gone. You have a budget and goals that you are trying to save for, but life has gotten in the way. Your savings
goal will have to wait until next pay period… again. If you have found yourself in this recurring cycle, then a
reverse budget might be a good fit for you.
Reverse budgeting is a strategy where you ‘pay yourself first’ by moving cash directly to your savings account or
investment account when you get paid and then allocating the rest for spending. This approach differs from
traditional budgeting in a few ways. First, in a traditional top-down budget, you take your gross income, and you
subtract all your expenses. What you save each month is decided by what is left over at the end of the month, so
the amount can vary from month to month. In a traditional budget, people typically categorize their expenses.
For example, you might plan to spend no more than $600 this month on groceries, or $250 on clothes. Using a
reverse budget can minimize or even eliminate the time-consuming process of categorizing where each dollar is
spent. Here’s how it works instead: when you get paid at the beginning of the month, some predetermined
amount, let’s say $1,500, transfers from your bank to your investment account. The transfer is set up on autopilot,
so you don’t even have to think about it. For the rest of the month, your budget is the amount of money left over. It
doesn’t matter so much where you spend each dollar. One month you might eat out more; one month you might
splurge on new clothing. So as long as your total spending does not exceed the money left over, you’re living
within your budget.
There are some significant benefits to this approach. The biggest benefit is that your saving becomes automatic,
and more importantly, consistent. Consistent savings is one of the best ways to reach your long-term goals. A
reverse budget can still be flexible, however. If you are trying to follow this approach, you can start by saving a
small amount each month and making adjustments as you get more comfortable. If there’s a month where you
know you’ll need a little more cash on hand, around the holidays for example, you could skip a monthly transfer to
your investment account.
There are some additional factors to consider before diving into the reverse budgeting approach. First, a reverse
budget is hard to set up and maintain if money is tight. If you find that your income barely covers your expenses
with very little left over, this might not be the right approach for you. Another thing to review is debt. If you have
high interest baring debt, like credit card debt or personal loans, you might be better served by directing your
monthly savings toward paying those balances down instead of investing. Your financial advisor can help give you
advice on where to direct your extra dollars.
A reverse budget can be a powerful tool to put you back in the driver’s seat and set you up for long term financial
success. It can help you actively pursue your short-term and long-term savings goals rather than relying on the
uncertain leftovers at the end of each month or pay period. In the realm of personal finance, adopting a reverse
budgeting mindset holds the promise of not only simplifying the budgeting process but also fostering a consistent
and proactive approach to achieving your financial objectives.

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Happy New Year, everyone!
2023 marked an inflection point for markets with strong gains across both stocks and bonds. The S&P 500, Dow,
and Nasdaq generated exceptional returns of 26.3%, 16.2%, and 44.7% with reinvested dividends last year,
respectively.
The S&P has come full circle and is now only a fraction of a percentage point below the all-time high from exactly
two years ago. The U.S. 10-Year Treasury yield climbed as high as 5% in October before falling to end the year
around 3.9%, pushing bond prices higher in the process. International stocks also performed well with developed
markets returning 18.9% and emerging markets 10.3%. What drove these results and how could they impact us
in 2024?
Perhaps the most important lesson of 2023 for everyday investors is that news headlines and economic events
don’t always impact markets in obvious ways. Last year’s positive returns occurred despite historic challenges
including the worst banking crisis since 2008, rapid Fed rate hikes, debt ceilings and budget battles in
Washington, the ongoing war in Ukraine, the conflict in the Middle East, cracks in China’s economy, and many
more. If you had shared these headlines with an investor at the start of 2023, they would probably have assumed
there would be a worsening bear market or a deep recession.
Why isn’t this what happened? At the risk of oversimplifying, the key factor driving markets the past few years
has been inflation. High inflation affects all parts of the markets and economy including forcing the Fed to raise
interest rates, slowing growth, hurting corporate profits, dampening consumer spending, and acting as a drag on
bond returns. This is exactly what occurred in 2022 but many of these effects reversed in 2023 as inflation rates
improved.
The headline Consumer Price Index, for instance, jumped 9.1% in June 2022 on a year-over-year basis but only
grew 3.1% this past November. Unfortunately for consumers and retirees, this does not mean that prices will fall
back to pre-pandemic levels – only that they will rise more slowly. For markets, however, what matters is that the
rate of change is slowing and that core inflation could gradually approach the Fed’s 2% long run target.
Thus, the recession that was anticipated by markets a year ago has not yet occurred. While many still expect
economic growth to slow this year, it’s not unreasonable to suggest that the Fed could achieve a “soft landing” in
which inflation stabilizes without causing a recession. This is why both markets and Fed forecasts show that they
could begin to cut policy rates by the middle of the year.
What does this mean for the year ahead? If 2022 was characterized by the worst inflation shock in 40 years,
leading to a bear market in stocks and bonds, 2023 saw many of these factors turn around. These trends could
continue if the Fed does begin to ease monetary policy. Of course, much is still uncertain and we should always
expect the unexpected when it comes to market, economic, and geopolitical events. After all, markets never
move up in a straight line and even the best years experience several short-term pullbacks.
The past year was a good reminder of the importance of staying invested and diversified across all phases of the
market cycle, rather than trying to predict exactly what might happen on a daily, weekly, or monthly basis. Below
are five key insights into the current market environment that will likely be important in 2024.
Financial Synergies Quarterly Newsletter | Q4 2023
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5
Five Insights to Understand
Markets in 2024
by Mike Minter, CFP®, CFS®

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1. Many asset classes performed exceptionally well in 2023
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Strong economic growth and falling rates propelled many asset classes higher last year. Stocks reversed much of
their losses from the previous year with a historically strong gain and bonds bounced back as interest rates fell in
the final months of the year.
Technology stocks, especially those related to artificial intelligence, helped to drive market returns as well, pushing
the Nasdaq to a nearly 45% return. While the so-called “Magnificent7” did double in value, other sectors also began
to perform better as market conditions improved.
Most importantly, there are signs that earnings growth is recovering. Earnings-per-share for the S&P 500 are
expected to have been flat in 2023, but Wall Street consensus estimates suggest that they could grow by double
digits each of the next two years. While this will depend on the path of economic growth, any increase in earnings
will help to improve valuations and support the stock market.
Financial Synergies Quarterly Newsletter | Q4 2023
1. Bonds have rebounded as interest rates have stabilized

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Financial Synergies Quarterly Newsletter | Q3 2023
Bonds had a much better year with interest rates rising through October then falling on positive inflation data.
While bonds have not recovered their 2022 losses after a historic spike in inflation, recent performance shows
that bonds are still an important asset classes that can help to balance stocks in diversified portfolios. This is
true across many sectors including high yield, investment grade, government bonds, and more.
3. The Fed is expected to cut rates in 2024
7
Improving inflation coupled with a historically strong job market have helped the Fed to achieve its policy
objectives.While it’s too early to declare victory, many expect the Fed to begin cutting rates in 2024. The Fed’s
own projections suggest they could lower rates by 75 basis points by the end of the year. Market-based
expectations are much more aggressive and are expecting twice as many cuts. While it’s hard to predict
exactly what the Fed may do this year, the fact that rates could begin to fall could help to support financial
markets and the economy.
4. The economy has been remarkably strong
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5. The most important lesson for investors is to stay invested
While the past twelve months have been positive for investment portfolios, 2024 will certainly not be without
its challenges.Volatilityin the stock market is both normal and expected with even the best years experiencing
short-term swings, as shown in the accompanying chart. The past few years are a reminder that holding an
appropriate portfolio is the best way for investors to achieve their long-term financial goals.
We’ll be ready for whatever the market throws at us!!
The economy has been stronger than many expected over the past twelve months. GDP grew by 4.9% in the third
quarter, one of the fastest rates in recent years. Consumer spending helped as did a rebound in business investment
as the interest rate outlook stabilized. Unemployment is still only 3.7% and while monthly job gains have slowed
somewhat, the labor market is still far stronger than economic theory would have predicted given the sharp increase
in interest rates.