$2 billion! While we do not measure our success merely by assets under management (AUM), we wanted to highlight this occasion by saying “thank you!” This number means nothing without our clients. This milestone affirms the values and client-focused approach that have defined Albion since our founding – 43 years ago.
Our success is built one relationship at a time, and this growth is a testament to the dedication of each member of our team and the trust of every client we serve. The numbers matter, but what’s most important is that we help people make a lifetime of good financial decisions.
As the golden days of summer unfold, this letter’s contributors each offer thoughtful perspectives: John Bird, CEO, characterizes how Albion’s steady guidance to clients aims beyond mere financial success, Jason Ware, CIO, charts the resilience of markets amidst uncertainty, and Senior Wealth Advisor Anders Skagerberg finds wisdom in the quiet growth of both gardens and portfolios. Read through to the Albion Community Update segment for details on our next conference call and to meet the two newest members of our Investment Team.
From John Bird’s Desk
What does it mean to have a successful financial life? It’s a question we’ve devoted our professional lives to understanding so we can guide clients along their own success path. Our work at Albion is concentrated in two overlapping spheres. The first is working to help each client understand their current financial position and where, on the current trajectory, their financial life is heading. We then work over the years to improve that trajectory through financial planning. Intimately associated with that is the second sphere; managing financial assets in service of the plan. Our investment team dives deeply into the economy and markets to identify and monitor investments that individually have merit and as part of a portfolio provide return potential and diversification. Our team must stay abreast of this flood of information every day and work to separate the signal from the noise. It’s ceaseless as financial markets never sleep.
In this quarterly missive you will hear the perspective of Jason Ware, our Chief Investment Officer, who with the rest of the investment team works daily to keep our portfolios on the right track. And you’ll hear from Anders Skagerberg, one of our Senior Wealth Advisors, who will highlight important planning issues and how they might impact you. The work of these teams is the foundation of what we do. But it’s not all we do. And from time to time it’s not the most impactful thing we do.
Is ‘What does it mean to have a successful financial life?’ the right question? I think not. Treating financial success as the primary objective is putting the cart before the horse. But drop a word and the question is better. How about ‘What does it mean to have a successful life?’. Albion’s work is to help our clients plan and manage their financial affairs so they stay on their path of a successful life.
A few examples may help illustrate this point. In just the last several weeks I’ve been fortunate to join client meetings where while a review of financial planning and investment issues was an essential exercise for setting the stage the challenges creating the most concern were less financial and more about life direction.
Taking the significant step to retire is one of these challenges. Our financial planning work provides clarity around the financial resources available in retirement. Portfolios are allocated to support retirement as well. The difficulty is often grappling with the question of “What does it mean to have a successful life?, which by extension requires coming to grips with stepping away from a career that has provided purpose, meaning, identity, and financial success often for decades. Having some notion of what we are retiring to is at least as important as acknowledging all we’ve gained from what we are retiring from.
In a recent meeting a client announced she’d made the decision, informed her employer, and was retiring in six weeks. We of course were excited for her and happy to hear the news. But it wasn’t a surprise. Rather it was the culmination of a long and thoughtful process of exploring what retirement would look like from a variety of perspectives. She’d thought through and had begun engaging in what she was retiring to. She had a strong family and friend group outside the office. And she knew the financial opportunities and limitations retirement would bring.
Working with our clients as they negotiate the challenges of an ill spouse, child, or parent or the death of a spouse, child, or parent are other areas where financial stability is not, nor should it be, the primary focus. However it can be helpful when we are able to work with our clients to help them see a clear path to continued financial stability during such difficult times. The passing of a spouse is very difficult and may lead to a reexamination of life’s priorities. Serving as a sounding board, and a financial check and balance, for surviving spouses during these transitions has been helpful to our clients and gratifying when in some small way we are able to contribute to a better outcome.
I met with a long-time client the other day whose spouse passed away after a protracted Alzheimer’s driven decline. Prior to her decline the two of them were inseparable. They built and ran a business together, played music and traveled together, and were clearly one another’s best friends. Alzheimer’s changed their roles. He became the primary caregiver, she the patient. Now she’s gone. The joy of running and growing the business is not nearly as powerful as it was when he shared challenges and successes with his best friend. Yet it’s been central to his life for five plus decades. He is working to redefine what’s most important to him and to be deliberate about what he’d like the next decade to be. I don’t know if our conversations will truly help him narrow down the potential paths available though I do feel that offering a safe space to explore – and helping keep financial guardrails in place – has offered a modicum of peace of mind.
What are the takeaways? Having a place to explore your prospective path into the future with someone who can listen carefully and without judgement yet help ensure your financial guardrails remain in place may be helpful. Honoring who we are and where we’ve come from yet being open to step out of the past into the future opens a world of possibilities. And finally I’d like to note the primary conclusion from an eighty-five year study by Harvard University into determining the key factors that are the best indicators of being happy in life. It comes down to one: Positive relationships keep us happier, healthier, and help us live longer. It pays to care about one another.
We will continue to work to offer excellent guidance as we endeavor to help you make a lifetime of good financial decisions. We will work to ensure your financial assets are invested to offer a high probability of meeting or exceeding your goals. But this is only part of it. Each of us needs to nurture those relationships that whether we know it or not truly give our life meaning.
Thank you for entrusting your financial-well being to Albion. We will never take your trust for granted and work each day to earn it over again.
Economy and Markets by Jason Ware
The second quarter of 2025 gave investors a bit of everything: acute policy uncertainty, sudden war in the Middle East, a sharp drawdown in stocks, and new all-time highs – all in the span of twelve weeks. April opened with a thud, as newly announced tariffs sent markets into a tailspin. Stocks dropped quickly in almost Covid-like fashion, bond yields jumped, and recession chatter returned. But the panic faded almost as quickly as it began. By the end of the month, the White House had walked back key parts of the tariff plan, easing pressure. Markets stabilized. Come mid-May, they were rallying once again as a second key tariff pause, this time with China, took hold. By late June, the S&P 500 had not only recovered it hit fresh highs and in the face of Israeli and US airstrikes on Iran nuclear facilities. Wow. Markets always seem to climb that “wall of worry.”
Underneath the headlines, the economic backdrop continued to evolve, but not unravel. After a soft first quarter – real GDP slipped slightly into negative territory solely due to a flood of imports ahead of tariffs – the second quarter is shaping up stronger, with current estimates near +3% growth. Averaging the two quarters, the first half of the year is running around +1.5%. Not bad. Meanwhile, the labor market remains healthy. Job creation has normalized and is in positive territory, while unemployment remains stable and wage growth outpaces inflation helping real incomes. Given this employment backdrop consumer spending is holding up, especially among middle- and higher-income households. On the business side, capital investment remains solid led by AI infrastructure, automation, and software. That said, not everything is firing – manufacturing is weak (been in a slump for over 2 years), housing is stuck in a low-transaction freeze, and tighter credit conditions persist. Nevertheless, the US economic engine overall is still running.
Inflation has settled into the “2 percent-plus” zone we’ve long argued would occur. It’s neither reaccelerating nor all the way back to the Fed’s 2% target. Numerically, core PCE, the Fed’s preferred measure, hovers in the high-2% currently driven by sticky shelter prices and select other services (like insurance). Going forward, many fret that tariff costs will be an upside impulse to general inflation. From our perch, we doubt that will be the case as the services category cools further.
Speaking of the Fed, Powell & Co. held rates steady through the quarter, signaling a patient stance. The Fed isn’t in a hurry. They want to see how the economy evolves with tariffs and clearer signs that inflation is heading toward target. From our vantagepoint, the destination remains the same … a Fed funds rate in perhaps the high 3% range, which we view as neutral. The path there may just take longer than originally hoped. Indeed, we still pencil in two rate cuts this year, probably commencing in September. The annual gathering of central bankers in Jackson Hole later this summer (August) should be interesting.
Against that backdrop, equities have displayed their mettle. The early-April plunge sent the S&P 500 down over -12% (-20% off February highs), yet business earnings and economic data kept coming in resilient, so buyers returned. To wit, first quarter profits rose over +13% year-over-year and early Q2 numbers are tracking positive as well. Full-year EPS is projected to reach ~$270 / share with 2026 estimates near $300. For perspective, that’s nearly double 2019’s pre-pandemic baseline. American companies continue to adapt and grow in ways that defy easy macro narratives.
Valuations, however, are arguably “full.” The S&P now trades at roughly 22x forward earnings (P/E) – historically rich, though supported by good fundamentals. Moreover, valuation tells us little about near-term market direction and that premium may be justified by unmatched domestic corporate vitality – much of which remains concentrated in a few mega-cap names, the epicenter of said dynamism, though it is beginning to broaden. We’re seeing renewed interest in sectors like healthcare, financials, and industrials. Concurrently, after a notable sluggish stretch, other areas like small and mid-cap stocks – even international equities – are starting to show signs of life. We continue to believe that in this environment, where the market’s leadership may be less concentrated, diversification is prudent.
Earlier this year we stated that 2025 could be defined by “three twos”: (roughly) +2% GDP growth, core inflation in the 2s, and two Fed cuts. That framework still holds. It’s a setup that doesn’t require heroic assumptions. With the economy expanding, profits growing, inflation steady and unproblematic, and rates in check, the case for an enduring bull market remains intact. Of course, risks haven’t vanished. Geopolitical friction, policy missteps, and DC politics may stir up volatility. But volatility, as ever, is a feature – not a bug – of long-term investing.
We’ll continue to monitor the shifting landscape, adapt where necessary, and stay grounded in what matters most – discipline, resilience, and taking the long view. Thanks, as always, for your trust.
Planner’s Corner by Anders Skagerberg
This spring has been a big one for me. It’s our first in our new home in Murray, we’ve just welcomed our third child (a healthy boy named Henry), and I’ve been spending many mornings out in the garden.
There’s something about those early hours, cup of coffee in hand, checking on the tomatoes and peppers, trying to figure out why my cucumber plant won’t grow (still a mystery), pulling a few weeds. It’s quiet work. Not flashy. But very satisfying.
What’s been most striking, though, is how much it mirrors the work I do as a financial planner—and how similar growing a garden is to building wealth.
You Can’t Rush Growth, But You Can Set the Stage
There’s a quote I love from Bill Gates:
“Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
That feels especially true for me right now as I look out at my young and untamed garden.
I’ve spent the last few months designing, planting, weeding, laying mulch, and getting the irrigation just right. A lot of the effort is invisible—underground, behind the scenes. The payoff isn’t instant. But if I do it right, I’ll be reaping the rewards for years to come.
Wealth works the same way. The early stages are foundational:
Contributing to retirement accounts
Investing for the long run
Avoiding mistakes
Being patient
It’s easy to lose sight of the long-term vision when you’re knee-deep in the work. But if you can keep that vision in focus, the rewards can be staggering.
Some Things Multiply on Their Own—If You Let Them
I planted strawberries and asparagus this year, and one thing I love about both is that they propagate. They send out runners, expand their reach, and come back season after season, bigger, stronger, more fruitful.
That’s garden compounding at its finest.
When it comes to your money, compounding growth is one of the most powerful forces in investing.
As your investments generate returns, those returns begin to generate their own returns—leading to growth on top of growth. Over time, this creates an exponential curve that’s easy to underestimate but incredibly impactful. With enough time and consistency, compounding becomes a positive feedback loop that can help you reach your financial goals—and potentially go far beyond them.
But you have to give it time and be patient. And of course, you have to protect against weeds.
Weeds Never Pull Themselves
In the garden (especially mine it seems), weeds are inevitable. They pop up after a rainstorm or creep in when you’re not looking. Left alone, they choke out the things you actually want to grow.
Financially, weeds can take the form of:
Delaying your estate plan
Spending more than you make
Jumping in and out of the market
Individual weeds may seem minor in isolation, but over time they drain energy, attention, and resources. Staying on top of them—just like in the garden—is what creates space for the good stuff to thrive.
Sometimes You Have to Get Technical
Here at Albion we talk a lot about simplicity in financial planning and investing—and for good reason. The fundamentals are powerful: spend less than you earn, invest consistently, own great companies, think and act long term, and stay diversified.
But sometimes, getting to simplicity requires complexity behind the scenes.
When I set up my irrigation system this spring, I had to dig into the details: What size dripper for each plant? How long for each zone? How frequently, and at what time of day?
It was technical, tedious, and worth every minute—because once it’s dialed in, everything else runs smoothly.
That’s how I think about tax planning, too.
It’s not glamorous, and it’s often overlooked. But when you fine-tune the details, create solid income projections for the year and compare different tax scenarios and strategies, you begin to understand how you can save money at tax time each and every year.
And just like the irrigation system, once it’s set up right, your financial plan can run more efficiently—with less stress, better results, and just minor changes along the way.
At the end of the day, good gardening and good planning aren’t all that different.
The same principles apply:
Start with a plan.
Dial in the details.
Check in regularly.
Clear the weeds.
Invest long-term.
Stay patient.
And remember—growth might not look dramatic day-to-day, but when you zoom out, you’ll be amazed at what you accomplish.
Here’s to a summer of steady effort and meaningful progress—in your garden, your finances, and your life.
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
We are pleased to share that Albion Financial Group has been included in Financial Advisor Magazine’s America’s Top RIAs list for 2025.
About the Ranking
Each year, Financial Advisor Magazine compiles its list of America’s Top Registered Investment Advisors (RIAs) based on assets under management (AUM) at independent RIA firms. For the 2025 edition, the ranking includes firms with AUM exceeding $500 million as of December 31, 2024. This recognition places Albion Financial Group among the top-tier advisory firms in the country.
Proudly Representing Salt Lake City
We are especially proud that Albion Financial Group is the only Salt Lake City-based firm to be included in this year’s list. This distinction underscores our position as a pioneer in the financial advisory industry, both locally and nationally.
Looking Back
This ranking highlights the firm’s impressive growth from our founding in 1982. This growth is a reflection of the trust that many individuals and families have placed in our firm to help manage their financial futures. We are grateful for the opportunity to serve our clients and appreciate the confidence they have in us.
Looking Ahead
We thank FA Magazine for this recognition of the hard work of our talented team. We see our growth as a testament to our dedication, expertise, and service to our clients and it inspires us to continue striving for excellence and innovation in all that we do.
Thank you for being part of the Albion community. We look forward to achieving even greater milestones together!
**Albion did not provide compensation to be included in this ranking. The criteria and methodology used are determined by the sponsoring organization and is generally based upon publicly available information. Please note that this ranking is not exhaustive, does not include all financial advisory firms nor does it consider individual client portfolio performance. A firm’s inclusion in this ranking does not constitute an endorsement or guarantee of its services and investors should conduct their own due diligence before selecting an advisory firm.**
During last week’s conference call, our panelists – Jason Ware (CIO & Chief Economist), John Bird (CEO & Co-Founder), Anders Skagerberg (Senior Wealth Advisor), and Liz Bernhard (President & Senior Wealth Advisor) – addressed the heightened uncertainty in today’s economic and market environment. They discussed recent volatility in both stock and bond markets, the weakening US dollar, and declining consumer sentiment. The conversation covered the broader economic landscape, including the impact of shifting trade policies, new tariffs, and changes in federal policy leadership, all of which have contributed to a general slowing in economic activity as businesses and consumers await greater clarity.
The team also shared insights from our client conversations. Many are understandably feeling nervous given the current uncertainty, and we emphasized that Albion’s planning process is designed to account for both good times and challenging periods. Our scenario modeling is designed so financial plans remain robust, even in less favorable environments. At the same time, we recognize that everyone’s situation and perspective is unique—some are concerned, while others, with more experience weathering market cycles, are less fazed by current events.
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
As the snow melts and spring blossoms emerge, we close the books on a dynamic first quarter and look forward to the opportunities that lie ahead in this season of renewal and growth. From the desk of Albion’s President Liz Bernhard, this letter begins with a retrospective of headlines from past recessions compared to the tone of today’s newspapers. Then our CIO Jason Ware details the strengths and weaknesses of the US economy and markets. Finally, Senior Wealth Advisor Anders Skagerberg promotes the long-term mindset that is required to persist through challenging times. Read through to our Community segment for team updates and upcoming events.
From the Desk Of Liz Bernhard
“This Time Is Different”—But Is It, Really?
Every market cycle brings its own headlines, anxieties, and reasons to believe that “this time is different.” And in some ways, it is—unique political developments, global tensions, new technologies, and shifting economic data can make the present feel unprecedented.
Lately, investors have voiced concerns about market volatility, geopolitical strife, and domestic political uncertainty. It’s easy to feel unsettled. These moments invite the temptation to react, retreat, or alter long-term plans based on short-term fears.
But while the circumstances change, human behavior rarely does. History shows that uncertainty is not the exception—it’s the norm. Markets have weathered wars, recessions, elections, and crises. And each time, the refrain is familiar: “But this time feels different.”
And yet—this too shall pass.
Let’s take a walk down memory lane. Remember the Great Financial Crisis of 2008? Of course you do. A few headlines from that time:
“Job Losses Accelerate, Signaling Deepening Recession” — The New York Times, Dec. 6, 2008
“Foreclosures Soar as Homeowners Fall Behind” — Bloomberg, late 2008
“World Recession Looms as Markets Tumble” — BBC News, Oct. 6, 2008
How about COVID?
“Wall Street’s Coronavirus Collapse Marks Fastest Bear Market Ever” — Bloomberg, Mar. 12, 2020
“Oil Prices Plunge to 18-Year Low as Demand Evaporates” — CNBC, Mar. 30, 2020
“March 2020 Becomes Most Volatile Month in Stock Market History” — MarketWatch, Mar. 31, 2020
The beginning of the war in Ukraine:
“Market Volatility Spikes as Russia Launches Full-Scale Attack on Ukraine” — CNBC, Feb. 24, 2022
“Stocks Swing and Oil Prices Soar After Russia Attacks Ukraine” — CBS News, Feb. 24, 2022
“Consumer Confidence Hits Two-Year Low as Inflation and Job Fears Rise” — Associated Press, Mar. 28, 2025
“Wall Street Tumbles, and S&P 500 Drops 2% on Worries About Slower Economy, Higher Inflation” — Associated Press, Mar. 28, 2025
Each moment felt unique: the worst economy since the Great Depression, a global pandemic, a war in Europe. And each time, the market—and headlines—reacted. Yet the market recovered.
The S&P 500 took about 4.5 years to recover from the March 2009 low during the GFC.
The COVID crash recovery took under five months.
After Russia’s invasion of Ukraine in February 2022, it took only a month for markets to bounce back.
The point is: markets recover. Stocks go higher. While each situation truly was different, those who stayed the course were rewarded.
The core principles of sound investing haven’t changed: stay disciplined, remain diversified, and stay focused on long-term goals. Emotional reactions to uncertainty are among the greatest threats to building lasting wealth.
Our approach remains rooted in evidence, not emotion. We build durable portfolios designed to weather a wide range of possibilities—always with an eye on the big picture and the most probable long-term outcomes: humanity will progress, economies will grow, markets will rise. And within that reality, asset allocation, diversification, behavior, and planning are what matter most.
The Wall Street Journal from March of 2020. The coronavirus outbreak fanned new fears of a worldwide recession, as well as an all-out oil price war, sending stock markets spiraling down to new record lows not seen since the financial crisis of 2008.
Economy and Markets by Jason Ware
The first quarter of 2025 is in the books, and it was a bumpy one. While it never feels like it at the time, corrections are normal – even healthy – in a bull market. Since 1928, the S&P 500 has experienced 103 such corrections, occurring about once every 13 months, with an average drawdown of -13.5%. The latest decline of about -10% follows an extended stretch of relative calm as the previous correction (September-October 2023) was roughly 16 months ago. Put differently, in a way, markets were sort of due. We certainly recognize that pointing to historical patterns offers little comfort when portfolios are under pressure. But history is clear on how most corrections end: by avoiding recession. The majority don’t turn into full-blown bear markets. When they do, it’s almost always tied to economic contractions or sudden, unexpected shocks.
Consequently, the critical question now is: where do we stand on recession risk? Let’s unpack.
Underneath the volatility – both in the markets and the headlines – the US economy remains on pretty good footing, though with some shifting undercurrents. Growth is moderating from last year’s pace, but not stalling. The labor market, while cooling at the margins, is still adding jobs, layoffs are low, and wage growth continues to outpace inflation supporting real household incomes. Meanwhile, business investment runs apace, with AI, automation, software, and infrastructure spending leading the way.
That said, some pockets of weakness are emerging. Higher borrowing costs continue to weigh on certain industries, particularly interest-rate-sensitive sectors like commercial real estate, housing, and manufacturing. Consumer spending, while resilient, is showing more divergence between higher-income households (who are still spending freely) and lower-income consumers, who are feeling the pinch of tighter credit conditions, a lower savings cushion, and elevated uncertainty. However, with pro-growth fiscal deficits still in place (despite ‘DOGE’), productivity improving, and a generally healthy jobs market underwriting robust services activity (by far the largest piece of GDP), we continue to believe the post-Covid economic expansion endures.
Meanwhile, the inflation story has largely played out as we’ve expected. The supply shocks and demand surges of 2021-23 have faded, and price pressures have eased. While we’re unlikely to see inflation sustainably at 2% any time soon, the mid-to-high-2s look like a reasonable resting place. That’s a world away from the 9.1% peak of 2022, and as long as inflation stays contained the Fed has room to maneuver. Moreover, as we’ve past highlighted, inflation at 3% or less is constructive for both the economy and stock market.
After holding rates steady for much of 2024, the Fed finally pivoted to rate cuts late last year. The goal? A “soft landing” where inflation stays in check without tipping the economy into recession. The Fed’s definition of “neutral” policy – where rates neither stimulate nor restrict growth – coupled with the economy’s structural underpinnings as we see them suggest a terminal fed funds rate somewhere around 3.5%. With inflation easing, the Fed had begun moving in that direction, but the path forward remains uncertain. Markets are pricing in multiple rate cuts ahead, but the Fed is keeping its options open, and we see “sticky” inflation restraining them for now – unless unemployment begins to rise meaningfully.
Bond yields have settled into a more predictable range. If neutral rates are around 3.5% and term premiums are historically normal, then long-term Treasury yields should hover in the 4.0-5.0% range. Of course, fiscal deficits, geopolitical events, US economic growth and inflation, as well as investor sentiment will keep things volatile at times. But in general, this is a favorable environment for long-term investors with a balance asset allocation looking to lock in attractive yields.
Turning to stocks, notwithstanding the acute volatility since late-January, US equities remain well-supported by fundamentals. Corporate earnings are growing at a healthy pace. S&P 500 earnings-per-share (EPS) finished 2024 at $243, with estimates for 2025 approaching $270 (that’s double-digit growth!) and 2026 potentially reaching $300. For context, EPS was about $138 at the Covid low and $162 in 2019, reinforcing the ever-present resiliency and dynamism that defines American business … a vigor we never wish to bet against.
While earnings growth remains strong, valuation is a key consideration. As of this writing, the S&P 500 trades at ~20.5x this year’s earnings – not “cheap” per se, but certainly not extreme. Much of the premium remains concentrated in a handful of technology (AI) stocks, while other areas of the market, such as healthcare, industrials, REITs, financials, and small / mid-caps, offer more attractive valuations. Many of the mega cap stocks, or “Mag 7”, also look more attractive amid the market pullback. Portfolio positioning remains key, as leadership may continue to broaden beyond the handful of dominant winners. In everything we do, the mantra own great companies and diversify reigns supreme.
In sum, as noted in our last missive, we’re calling 2025 “A Year of Three-Twos.” That is, a US economy growing at roughly +2%, core inflation settling into the mid-2s, and a Fed that may cut rates two times. It’s a backdrop supportive of continued, if more moderate, market gains. Indeed, we don’t need multiple expansion. Rather, merely sustaining nourishment from a salubrious business cycle and profits should do the trick. Of course, risks remain. Geopolitics, tariffs, government austerity, the level of inflation and bond yields could each or in concert introduce volatility. But overall, the foundation, at present, remains solid from our perch.
As always, we remain resolutely focused on navigating the ever-evolving landscape while keeping our true north, the long-term, firmly as our guide. Thank you for your continued trust!
Mind The (Behavior) Gap
Anders Skagerberg, CFP®, EA
As the first quarter of 2025 comes to a close, a few things stand out to me.
First and foremost, as an advisor, I’m reminded that one of the best parts of my job is the privilege of walking alongside my clients—through market ups and downs, life’s milestones, and all the thoughtful decisions in between. This is meaningful, important work.
Second, periods like these highlight just how powerful human behavior is. Recently, markets have been bumpy and headlines unsettling, affecting how we feel as investors—and ultimately, how we behave.
Like it or not, we’re wired to feel losses more intensely than gains and to focus more on negative information than positive. These behavioral biases—known as loss aversion and negativity bias—are built-in features of the human brain.
Now, don’t get me wrong—these biases aren’t inherently bad. Think of them like a well-meaning friend who always ‘speaks their mind.’ They’re survival mechanisms, hardwired to protect us from danger. If we rewind a few hundred thousand years, early humans lived in a world filled with physical threats, where losing essential resources like food, shelter, or safety could literally mean life or death. That harsh reality shaped our brains to prioritize avoiding losses and taking fewer risks—because back then, one wrong move could have serious consequences.
Fast forward to today, and those same instincts often lead to unintended, sometimes costly, outcomes. What once protected us can now get in the way, pushing us toward decisions that undermine our long-term financial well-being.
In our industry, we call this impact The Behavior Gap.
At Albion, this concept is so central to how we think about investing that we’ve made “Behave Yourself” one of our Four Pillars of Investing. It’s something our Chief Investment Officer, Jason, reminds us of regularly: “Investor behavior will determine success or failure more than anything else.”
Popularized by financial writer Carl Richards and quantified in Dalbar’s annual Investor Behavior Report, the behavior gap refers to the difference between what an investment should return and what an investor actually earns. Simply put, it’s the gap between potential returns and actual results.
And it turns out, there’s quite a gap.
Dalbar’s most recent study, published in April 2024, shows the average investor underperformed the market by 5.5% in 2023—the third-largest gap in the past decade. Looking at the long-term data, since 1988 the market has averaged a 10% annual return, while investors earned just 4.1%. That’s nearly a 6% shortfall per year!
This is why, as investors, managing our own behavior is one of the most crucial ingredients for growing wealth.
Of course, that’s easier said than done. If it were easy, everyone would do it—and the gap would disappear. But it’s worth the effort. And ultimately, this is where we strive to add the most value as your advisors. We understand it’s scary. We understand how it feels (we’re investors too). And we understand what’s at stake.
If nothing else, I hope this gives you a glimpse behind the curtain at how we think about our work. To us, the most meaningful thing we can do is be there—through the good times and the bad—to help you make the best decisions for yourself and your family, even when they don’t feel like the easiest.
But before I go, in true advisor fashion, I want to leave you with some practical steps. Here’s how to mind the (behavior) gap:
Step 1: Be aware of the gap.
If you’ve read this far, you’re already ahead—you’re now aware of the gap that exists between investment returns and investor returns. Awareness is the first, crucial step.
Step 2: Understand the role of volatility.
You’ve likely heard the term, but volatility simply measures how much and how quickly an asset’s price moves over time. Here’s the key: volatility isn’t something to avoid—it’s something to expect. It’s the price we pay for long-term growth. As financial writer Morgan Housel puts it, “Volatility is the price of admission. The prize inside is superior long-term returns. You have to pay the price to get the returns.”
But here’s the part you can control: how much volatility you feel.
Consider two investors who both started 30 years ago, invested the same way, and never sold. One checks their account once after 30 years. The other checks daily.
Both end up with the same financial result—but their experiences are vastly different.
The first investor might think, “Wow, investing is simple. Look how much my account grew.” The second, having lived through every dip—the dot-com crash, the 2008 financial crisis, the COVID crash—might feel like they barely made it through.
This is an extreme example, but the point stands: volatility is unavoidable, but how intensely you experience it is within your control. The more you check, the more you’ll feel the bumps. The volatility exists either way—but you decide how much of it affects you.
Step 3: Focus on what really matters.
At the end of the day, investing isn’t just about numbers or market performance—it’s about your life, your family, your dreams, and your legacy. When headlines feel overwhelming and markets feel uncertain, it helps to come back to what truly matters.
Think about the goals we’ve planned for together—whether it’s retirement, supporting your kids or grandkids, or contributing to causes close to your heart. Keeping these front and center brings clarity and perspective when doubt creeps in.
As your advisors, we’re here to keep you grounded in those objectives. It’s not always easy, but the most important decisions rarely are. We’re grateful for your trust and partnership as we navigate these moments—always keeping your bigger picture in mind.
Read the full quarterly letter with the Community segment here.
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
We are thrilled to announce that our esteemed colleague, Sarah Bird, CFP®, has been named to the National Association of Personal Financial Advisors (NAPFA) Women to Know list for 2025. This recognition is a testament to Sarah’s outstanding professional accomplishments and her unwavering commitment to promoting women within the financial planning profession.
As a Senior Wealth Advisor at Albion Financial Group, Sarah has consistently demonstrated her dedication to empowering women through financial education and personalized guidance. Her leadership in the “Women of Albion” program has been instrumental in helping women take control of their financial futures.
NAPFA’s Women’s Initiative plays a crucial role in attracting, supporting, and developing female advisors and leaders across the industry. This aligns perfectly with Sarah’s career-long focus on education and empowerment, particularly for women and recent widows. As a Trauma of Money certified advisor, Sarah’s work often addresses the emotional and psychological aspects of financial decision-making, which can be crucial for individuals dealing with financial challenges that may stem from trauma.
Albion Financial Group is proud of our long-standing relationship with NAPFA, an organization that has been at the forefront of promoting the highest professional standards in financial advising since 1983. Sarah’s recognition further strengthens our commitment to NAPFA’s mission and values.
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
Stocks finished higher and bond yields fell slightly during a holiday-shortened week that was light on macro data, but long on executive orders and policy pronouncements from the new Trump administration. Notably absent was the immediate enactment of tariffs on Mexico, Canada, and China, which had been repeatedly promised by Donald Trump on the campaign trail. Markets breathed a sigh of relief that perhaps tariffs would be used more thoughtfully by the Trump administration than many had feared.
The rise in stocks was broad-based, with 10 out of 11 sectors in the S&P 500 finishing higher on the week. Energy was the lone exception thanks to a $3/barrel pullback in oil prices. International benchmarks finished higher and largely outperformed the US, in large part due to relief that a punitive tariff regime was not immediately enacted by President Trump.
In fixed income, interest rate volatility subsided for the time being despite public pronouncements from Donald Trump that rates “need to be lowered immediately.” Credit rallied and spreads finished tighter by 2 basis points, in sync with the gains in equities.
In macro news:
* S&P’s US Manufacturing PMI just barely rose into expansion territory at 50.1
* S&P’s US Services PMI unexpectedly fell 4 points to 52.8
* The U of Mich. Consumer Sentiment index fell 2 pts to 71.1 in the final January print
* Existing home sales rose 2.2% in December to a SAAR of 4.24 million
Chart of the Week: University of Michigan Consumer Sentiment
Albion’s “Four Pillars”:
Economy & Earnings
The US economy has been resilient despite the higher interest rate environment. S&P 500 earnings are on track for high single-digit y/y growth for full-year 2024, with consensus calling for an acceleration to double-digit y/y growth in 2025.
Valuation
The S&P 500’s forward P/E of 22.2x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the mid single digits.
Interest Rates
After the “hawkish cut” at the December 2024 FOMC meeting, a near term pause on further rate cuts is likely, and the curve has mostly resumed its normal upward slope. Belly and long end rates in the 4% to 5% range likely represent the “new normal” given solid economic growth, lingering inflation pressures, and large US fiscal deficits.
Inflation
After the disinflationary trend resumed in the summer of 2024, more recent inflation data has shown some renewed signs of stickiness. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs.
Publisher’s Note: This is the final Weekly Market Recap from Michael Kessler after five years of writing this article every week. Michael is leaving Albion Financial Group this week. We thank him for his contributions over the years and wish him the best in his future endeavors!
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
Bond yields rose and equities fell after stronger-than-expected labor market data and rising inflation expectations dampened rate cut hopes.
On the labor front, the monthly JOLTS report showed 8.1 million open jobs in the US for November, more than 350k above consensus estimates which had called for a small sequential decline. The prior month was revised higher as well.
Then on Friday, the monthly jobs report from the BLS also exceeded consensus, with 256k nonfarm payrolls added. Unemployment (U3) fell 10bp sequentially to 4.1%, and underemployment (U6) fell 20bp to 7.5%.
At the same time as the labor market was showing continued strength, inflation concerns were stoked by the ISM Services Index, as the Prices Paid component unexpectedly rose more than 6 points sequentially to 64.4.
And finally, preliminary January data from the University of Michigan’s Consumer Sentiment survey showed rising inflation expectations over short (1y = 3.3%; +50bp m/m) and longer term (5-10y = 3.3%; +30bp m/m) time horizons.
The outcome for financial markets was predictable:
* Fed funds futures now imply just one 25bp rate cut will occur in 2025
* Treasury yields rose across the curve, with the 20y briefly breaking above 5%
* Equity prices fell, led by rate-sensitive sectors like tech, financials and real estate
Chart of the Week: Net Nonfarm Payrolls Added
Albion’s “Four Pillars”:
Economy & Earnings
The US economy has been resilient despite the higher interest rate environment. S&P 500 earnings are on track for high single-digit y/y growth in 2024, with consensus calling for an acceleration to double-digit y/y growth in 2025.
Valuation
The S&P 500’s forward P/E of 21.5x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the mid single digits.
Interest Rates
After the “hawkish cut” at the December 2024 FOMC meeting, a near term pause on further rate cuts is likely, and the curve has mostly resumed its normal upward slope. Belly and long end rates in the 4% to 5% range likely represent the “new normal” given solid economic growth, lingering inflation pressures, and large US fiscal deficits.
Inflation
After the disinflationary trend resumed in the summer of 2024, more recent inflation data has shown some renewed signs of stickiness. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs.
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
As we bid farewell to the first quarter of the 21stcentury, we stand at the crossroads of innovation and uncertainty, where the echoes of past challenges mingle with the whispers of future possibilities. In this letter, our CEO John Bird explores how perspectives of political events have shifted over time, challenging our understanding of economic decision-making. Our CIO Jason Ware remarks on the economics of 2024, setting the stage for an intriguing financial landscape in 2025.Then, Senior Wealth Advisor Anders Skagerberg, standing at the threshold of this new year with its opportunities and challenges, looks to turn your aspirations into achievable goals and navigate the evolving landscape of personal finance with confidence and clarity.
FROM JOHN BIRD’S DESK
While inauguration day is still several weeks away it’s clear President elect Trump is already having an impact on how we view policy and economics domestically and globally. Markets responded favorably to his propensity toward deregulation and lower taxes. Individual reactions to Trump’s statements vary wildly depending on preconceived notions of his policy and personal views of his character. This is normal. Yet for the better part of a century the field of economics treated human emotions as secondary. When and why did economics become a field viewing itself as distinct from politics specifically and the vagaries of the human condition writ large?
The study of political economy evolved in the sixteenth century as philosophers of the time worked to understand the interplay of government policy and household management. These early writers wanted to know how we as individuals made decisions and how government policy choices impacted those decisions. Adam Smith is perhaps the best known visionary in this school of thought though there were several others influential at the time. An overriding thesis was the notion that allowing for individual incentives fostered greater creativity, effort, and wealth creation than dictates from on high.
Centuries later, toward the end of the eighteen hundreds physical sciences were expanding understanding of our natural world through the scientific method and increased use of mathematics. It was in this period that the term “economics” began to supplant “political economy” as the field worked to shift more toward mathematical modeling of economic decision making with less reliance on factoring in the human emotional element driving the course of our economic path.
In the twentieth century the study of economics was dominated by factors that could be quantified. Numbers ruled the roost. And this period gave us volumes of insights into the working of our economic system which continue to help guide policy and investment decisions today. Yet an awareness of the importance of human behavior in economics can scarcely be overstated. Many of us work to be logical in our decision-making. But when we pull the trigger, it is the emotion of the moment that compels us to act. As investors we ignore this reality at our peril.
The University of Michigan collects data on consumer sentiment based on political party and the insights are a striking example of how our worldview impacts our perceptions. The information highlights that when a democrat is elected to the oval office democratic consumer sentiment spikes upward while republican sentiment plummets. When a republican is elected the effect is inverted. These changes in sentiment are at best loosely correlated (and typically not correlated at all) to unemployment rates, income growth, interest rates or other quantifiable factors that impact aggregate financial well-being. Rather, it’s us as humans acting … human. Turns out how we feel about something has a big impact.
When we look at how we respond to various events – like elections – it’s clear that “political economy” is a better way of understanding our environment and our behaviors than economics alone. It’s also essential to note that while we may understand the why of the financial markets a bit better that doesn’t mean we should change our approach. We continue to invest in companies with competitive advantages that can be sustained for the foreseeable future. We continue to hold those companies regardless of the emotions of the moment. Sometimes in the face of emotional swings so common to our human condition our best course of action is to follow the advice of the white rabbit in Lewis Carrol’s Alice in Wonderland: “Don’t just do something, stand there.” As we enter 2025, we will keep the wise words of said rabbit in mind and keep a steady hand on the tiller of your investments. Thank you for your continued trust and confidence in the Albion team. We wish you a healthy and prosperous new year.
ECONOMY & MARKETS by Jason Ware
What a charmed time this has been for Wall Street! The economy and earnings are doing well. Inflation and interest rates are coming down. Shoppers are outshopping. The US dollar has rallied, and the incoming administration is assumed to be more business friendly. The stock market is in its happy place as evidenced by yet another +20% annual gain. As we close out the year, let us explore each.
The US economy is strong. The labor market is healthy, people are pending, we have a boom in technology capex(AI and Cloud), and there remains a sturdy pro-growth fiscal tailwind. Things look fine today (nothing in the data points to recession) and growth in the years ahead should be stronger than the decade pre-Covid … not by a lot, but better … on rising real incomes, sustained expansionary policies from the Beltway, strong spending and investment on infrastructure and technology, and enhanced productivity.
On prices, the 2021-23 inflation problem has been solved. Not in terms of price level, that’s not going back down (a good thing). But as it relates to price growth, we’re now far better off. While the Fed’s 2% target remains elusive, we are close. Our view holds (for a few reasons) that we can expect inflation roughly in the mid-2s … that 2% will be this cycle’s floor not its ceiling (like in the 2010s) … and that’s just fine. Anything under 3% should be constructive for the economy and financial markets.
Meanwhile, the Fed is now in an easing cycle with a goal to arrive at “neutral.” For those with better things to do than study magic numbers in economics, the neutral rate is essentially inflation plus what economists call “r-star” (r*)– a real rate of interest that’s said to balance the economy. Neutral policy is neither expansionary nor contractionary. Presently, we consider this level to be perhaps 3.5-4.0% (note: for its part, the Fed currently thinks it’s 3%). Meaning, if things go well, we can expect a couple more quarter-point cuts along this path. Now, it’s possible (probable?) this won’t go perfectly to plan without some hiccups, but it could. And if so, that’s conceptually the track forward.
Bond yields take their cues from this base rate math. If 3.5-4.0% represents neutral fed funds and a reasonable term premium for the 10-year Treasury is maybe 1.0% or so, then 4.5-5.0% would be structural equilibrium. On the investment grade corporate side, add about +0.75-1.0% in risk premium. Certainly, these things will move around based on factors like mood, geopolitics, prospects for growth, inflation, and government deficits, making real-time bond yields messier than this straight-forward theoretical exercise. Nevertheless, today is a pretty good time to lock in yields, where appropriate, for balanced accounts.
Over in equity land, unsurprisingly we remain long run bullish on US stocks. The American system endures as the most innovative, dynamic, nimble, and resourceful economy on the planet. The finest universities, brightest minds, and most cutting-edge companies all reside here, not to mention the deepest and most efficient capital markets around. Combined, this is what Buffett calls the “American tailwind” – a force the now 94-year-old sage still believes will propel us onward in the years and decades to come. We agree. Accordingly, our belief is that stock prices will continue to do what they’ve always done: track the general direction of workforce demographics, economic growth, innovation, and business profits, all of which move up over time taking with them the long-term oriented investor.
Speaking of corporate profits, the single biggest item that informs stock prices, they’re at record highs. It’s likely that the S&P 500 logged ~$240 in earnings-per share (EPS) in 2024. If the economy holds up (our base case) we could see ~$275 in 2025 and perhaps ~$300 in 2026! For perspective, EPS troughed at ~$138 during Covid and was ~$162 the year before the pandemic. US companies are quite skilled at making money. More importantly, our portfolio companies continue to shine on this front. We still skew positive for our outlook on corporate earnings. Naturally though, there are some warts. Notable is valuation as stocks aren’t cheap. However we don’t deem them as expensive as those who cite “24x”, CAPE, or whatever. Moreover, it depends on where one chooses to look. Are there expensive parts of the market? Absolutely. More attractive expanses? Totally. At the index level, the S&P 500 currently has a price-to-earnings ratio (P/E) of just over 24x 2024 EPS and 21x that of 2025. Again, not cheap, but not crazy either. It’s been higher at times, and P/E is a terrible timing tool (its best use is to gage expected returns over longer periods, like a decade) so we can’t glean much from these figures as to where the market goes short run. Resultantly, we judge valuation as OK especially if earnings are expanding, inflation is benign, and we’re in an easing cycle with sensible and stable(ish) long rates. Too, post-election, we believe that earnings over the next year or two might come in higher than existing estimates on the notion that less regulation, lower taxes, and increased buybacks could fuel even loftier figures. We’ll see.
Underneath the index level, technology, AI, and the ‘Mag 7’ do look richer relative to other areas, while most everything else is cheaper (S&P 500 is ~16x ex-tech). Spots like health care (and other “defensives”), industrials, REITs, small caps, mid-caps, international, all sport lower valuations – both on a relative and absolute basis. The practical application of this being that portfolio construction and investment tilts matter, while diversification is still the only “free lunch” when investing. If equities broaden out (in earnest) in 2025, it’ll be important to have suitable exposures while preserving deliberate tilts toward quality businesses in tech and growing consumer names. Adding up the puts and takes, we think it unlikely the S&P 500 will be driven by multiple expansion in the years to come. Rather, earnings growth may contribute the lion’s share of the return. But don’t let that get you down beat. If earnings compound at, say, +6-8% (utterly doable) while dividends and buybacks add another couple percent, then the S&P 500 as purely an “earnings growth and shareholder returns story” can be a good stock market indeed. Falling P/Es would be a head wind to this calculus, but for now that’s not our expectation.
As we look ahead to 2025 we are calling it “A Year of Three-Twos.” That is, a US economy firmly growing mid-2s; (core) US inflation settling into the mid-2s; and a Fed that maybe cuts 2 times. 222 … an “angel number” (let’s hope!). Of course, amid all these variables and moving parts we’ll continue to do our job as your investment manager in navigating the landscape for our companies / investments. Thanks for your continued trust in us, and Happy New Year!
PLANNERS CORNER by Anders Skagerberg
As we step into 2025, the planning team remains committed to guiding you to a lifetime of good decisions.
The start of a new year is a chance to reflect, refocus, and take meaningful steps toward your financial goals. Whether you’re planning for a major milestone, fine-tuning your retirement plan, or simply looking to enhance your financial knowledge, we’re here to support you every step of the way.
Looking back, 2024 was a big year – markets were up, we had a presidential election, and so much more. As we look forward to the new year, no one knows for certain what it will hold, but we’re confident that with thoughtful planning and a focus on what truly matters, it can be a year of progress, opportunity, and positive change.
In this planner’s corner update, we will cover:
How to Crush Your Financial Goals in 2025 Practical tips and strategies to set meaningful goals, automate your success, and celebrate progress along the way.
Key Updates for 2025 A look at higher contribution limits, expanded gifting opportunities, Social Security adjustments, and new catch-up provisions for those nearing retirement.
What We’re Working on This Quarter An overview of our initiatives, from updating RMD calculations to integrating income and employer benefits changes into your financial plan.
Let’s make 2025 a year of financial progress and success. Together, we’ll navigate the opportunities and challenges ahead with confidence and clarity!
Next, How to Crush Your Financial Goals in 2025
As we kick off the new year, it’s the perfect moment to take a step back and think about what matters most to you—and how your finances can support that vision.
Depending on your stage of life, your financial goals might be less about growing your wealth and more about maintaining it, simplifying your financial life, or finding ways to use your money to create lasting memories with those you love.
Whatever your focus, the key is to make your goals clear and actionable.
Instead of aiming to “save more” or “spend less,” think about specifics. Maybe you want to fund a family trip, increase your charitable giving, or update your estate plan. Having a concrete goal gives you something to measure progress against—and makes it much easier to see the finish line.
Once you’ve clarified your goals, it’s time to focus on how to make them happen. One of the simplest ways to stay on track is to automate whenever possible. Automating your distributions, bill payments, or even charitable contributions ensures you’re consistent without having to think about it too much. Plus, it gives you more time and energy to focus on what really matters—whether that’s planning your next adventure, enjoying time with family, or pursuing a hobby you love.
Of course, flexibility is just as important as structure. Life has a way of throwing curveballs—unexpected expenses, changes in tax laws, or even an unexpected opportunity you want to pursue. Having some wiggle room in your financial plan can help you roll with the punches while staying on track. For some, that might mean keeping a healthy amount of cash on hand or simply revisiting their plan more regularly to make adjustments.
As you think about the year ahead, it’s also worth reflecting on the bigger picture. How does your financial plan fit into the legacy you’re building? Maybe it’s about leaving something meaningful for your loved ones or supporting causes you’re passionate about. Having a conversation with your family about your values, your estate plan, or even your charitable intentions can make all the difference in ensuring your vision is carried forward in the way you intend.
Finally, don’t forget to pause and appreciate the progress you’ve already made. Achieving your goals—big or small—is worth celebrating.
Whether it’s checking off a bucket-list experience, reaching a financial milestone, or simply enjoying the peace of mind that comes with knowing you’re on track, these moments matter. They remind us that financial success isn’t just about the numbers; it’s about living the life you want and sharing it with the people you love.
Here’s to making 2025 a year full of progress, purpose, and the joy that comes from seeing your hard work pay off.
Next up, here are some key financial updates to be aware of for 2025.
Key Updates for 2025:
Higher Contribution Limits:
401(k)/Roth 401(k): Increased to $23,500, with a $7,500 catch-up for those aged 50+.
IRA/Roth IRA: Remains at $7,000 with an additional $1,000 catch-up if you’re 50+.
HSA: Increased to $4,300 for individuals and $8,550 for families, with a $1,000 catch-up for those aged 55+.
Qualified Charitable Distributions (QCDs): Increased to $108,000 for those over age 70.5. This can be a great way to support the charities you love while receiving valuable tax savings.
Social Security Benefits COLA Increase:
Social Security benefits will receive a 2.5% Cost-of-living increase for 2025.
Expanded Gifting Opportunities:
The annual gift tax exclusion has increased to $19,000, (up from $18,000) offering more opportunities for tax-efficient wealth transfers. This means that you can give $19,000 tax-free each year to any person. For a couple, that’s a combined $38,000 per year they can give to a single person.
NEW “Extra” Catch-Up Contributions for those age 60, 61, 62, and 63:
Larger catch-up contribution limits are now in place for those aged 60-63, making it easier to save more if you’re nearing retirement age. The limit is $11,250 instead of $7,500. This is a new change as of this year and is part of the Secure 2.0 Act passed in 2022.
Inherited IRA RMDs
If you inherited an IRA from someone other than your spouse after January 1, 2020, the SECURE Act introduced a 10-year rule requiring the account to be fully distributed by the end of the 10th year following the original owner’s death. For beneficiaries where the original account owner had already begun taking required minimum distributions (RMDs), the IRS requires annual RMDs in addition to the account being emptied by the end of the 10-year period.
However, due to clarifications and administrative challenges, the IRS waived the annual RMD requirement for 2020 through 2024. This means that even if you didn’t take any distributions during these years, you did not face penalties. Starting in 2025, the annual RMD requirement will resume, and beneficiaries must take these distributions or potentially face penalties. The 10-year deadline for fully depleting the account remains unchanged.
If you are interested in learning more about any of these updates or need additional clarification, as always, we are here to support you.
Next up, here are some of the things we are working on this quarter as well as a few action items for you.
What We’re Working on This Quarter
The start of the year is always a busy time, and we’re focused on ensuring your financial plan is positioned for success. Here’s what the planning team is focused on:
Calculating Required Minimum Distributions (RMDs) for those who need them. For those who take monthly distributions to satisfy your RMD, we will be updating those amounts as well to reflect your new RMD for the year.
Updating Payroll Information and Benefits: If you’ve had changes in pay or recently made benefits elections during open enrollment, we’re integrating those updates into your plan.
Annual Tax Packages: for those with taxable accounts (non-retirement accounts) you will be receiving your annual tax package that includes a summary of your portfolio income for 2024. Reminder: this is not a tax document, just a summary. Investment account tax documents will be available from custodians starting in mid-February.
Action Items for You:
If you’ve received a raise, send us your updated pay stub so we can adjust your financial plan accordingly.
If your employer has an open enrollment period, share your benefits details with us to ensure your elections align with your goals.
Of course, this list is just a glimpse of what we’re focusing on this quarter. As always, we’re here to handle the details so you can stay focused on what matters most.
Ultimately, we’re thrilled to kick off another year of partnering with you to make thoughtful, informed financial decisions. Here’s to a successful and prosperous 2025!
Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.
