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What You Need to Know About the Fed

What You Need to Know About the Fed

Introduction

We talk a lot about the Fed Open Market Committee (FOMC) and monetary policy. So, it’s time we take some of the mystery out of the Fed’s structure and process. Let’s take a closer look at the Fed Board, how it works … and what it means to individual investors.

    How the Federal Reserve Board is structured

    The Federal Reserve Board is the leadership team behind the U.S. central bank, often called “the Fed,” which was established in 1913 by President Wilson when he signed the Federal Reserve Act into law. It is made up of seven members called Governors, who are appointed by the President and confirmed by the Senate.

    Each Governor serves a long 14-year term, which helps keep politics out of their decision-making. The Board works alongside 12 regional Federal Reserve Bank presidents spread across the country. Together, they help manage the economy by influencing interest rates, regulating banks, and keeping inflation in check—all things that directly affect your investments.

      How are decisions made and voted on?

      When it comes to making big decisions—like whether to raise or lower interest rates—the Board members meet regularly as part of a group called the Federal Open Market Committee. This committee includes all seven Governors plus five regional bank presidents. The President of the New York Fed is a permanent voting member while others rotate, serving one-year terms. Each member gets one vote, and decisions are made by majority rule.

      These votes are important because they can affect borrowing costs, stock market trends, and the value of your savings. If you’re investing in stocks, bonds, or real estate, Fed decisions can influence market movements and investor confidence.

        Why the Fed operates independently

        One of the most important things to know is that the Federal Reserve Board operates independently from the rest of the government. While elected officials appoint its members, the Fed doesn’t rely on Congress for funding and doesn’t take orders from the president. This independence allows the Fed to make decisions based on economic data, not political pressure.


        For investors, this means the Fed is focused on long-term stability rather than short-term political goals, which helps create a more predictable environment for financial planning. The Chair of the Federal Reserve Board (currently Kevin Warsh) is the most visible and influential member. This person leads meetings, guides discussions, and speaks publicly about the Fed’s outlook and decisions.
        While the Chair doesn’t have more voting power than other members, their leadership helps shape the Fed’s direction. For investors, the Chair’s speeches, interviews and Congressional testimony are closely watched. Markets often react to their tone and wording. Understanding the Chair’s views can provide insight into where interest rates and inflation might be headed, helping you make more informed investment choices.

          More about political influence

          In recent months, the Federal Reserve has faced intense pressure from the White House, particularly from President Donald Trump, who has pushed aggressively for lower interest rates. Trump has gone so far as to install a loyal economist, Stephen Miran, onto the Fed’s Board of Governors and attempted to remove Governor Lisa Cook for alleged mortgage fraud. The nomination of Kevin Warsh is also fresh in our minds.


          These moves are seen by many as efforts to tilt the Fed’s decision-making in favor of more politically convenient policies, like rapid rate cuts ahead of the 2026 election. For investors, this kind of pressure can create uncertainty about whether the Fed is acting based on economic data or political agendas.


          But there are legal and institutional safeguards designed to protect the Fed from political influence. It is for this very reason that we have long terms for Fed Governors and independent funding. These safeguards are crucial because they allow the Fed to make decisions based on long-term economic health rather than election-year politics. For DIY investors, this independence helps ensure that interest rate decisions are made with stability in mind, not political gain.


          If political pressure influences the Fed, markets can react unpredictably. For example, if investors believe the Fed is cutting rates to please the White House rather than to address real economic issues, it can shake confidence in the central bank’s credibility. This can lead to increased inflation expectations, higher long-term interest rates, and volatility in stocks and bonds. For investors, this means it’s important to watch not just what the Fed does, but why it’s doing it. The reasoning behind a rate cut can affect how markets respond.

            Historical challenges to Fed independence

            This isn’t the first time the Fed’s independence has been tested. In the 1970s, President Nixon pressured Fed Chair Arthur Burns to keep interest rates low in the run-up to the 1972 election, contributing to runaway inflation that hurt the economy for years. In 1981, there was friction between President Reagan and Fed Chair Paul Volcker over high interest rates implemented to tame inflation. More recently, Trump’s first and current terms have seen repeated attempts to influence Fed policy, including public calls for rate cuts and threats to fire Chair Powell.


            Some still criticize the timing of an aggressive 50-basis point rate cut on September 18, 2024. It was the first since the start of the Covid-19 pandemic and was just weeks before the presidential election. These episodes highlight that when the Fed caves to political pressure, the long-term consequences—like inflation and market instability—can be severe.


            In September 2025 the Federal Reserve cut its benchmark interest rate by 0.25%, bringing it to a range of 4.00% to 4.25%. This was the first rate cut in nine months and came amid signs of a weakening job market and slowing hiring. Inflation remains elevated, partly due to pressure from tariffs on imported goods, but the Fed prioritized employment concerns in its decision as charged by their dual mandate to maximize employment while stabilizing prices.


            Chair Jerome Powell emphasized at the time that the Fed was committed to its independence, even as political pressure mounted.

              It’s important

              Being in tune with the Fed and its economic and political pressures is important to investors. Having a feel for the direction of short-term interest rates is very important to evaluating the stock and bond markets. While short-term interest rates don’t necessarily move longer-term rates, Fed policy easing can still be an important tailwind for equity and fixed-income investors.

                Have questions?

                You can always reach out to the MoneyLetter Team by visiting our contact page: https://moneyletter.com/contact/

                What Documents Should I Gather for My 2025 Tax Return?

                What Documents Should I Gather for My 2025 Tax Return?

                Introduction

                Tax season becomes much less stressful when you know exactly what documents to gather before you begin! If you are preparing to file your 2025 tax return, collecting the right paperwork early can help you avoid delays, reduce errors, and ensure you claim every deduction and credit available to you. From income statements and investment reports to mortgage interest forms and charitable contribution receipts, having a complete checklist puts you in control of the process.

                Below is a practical guide to the key documents most individuals and families should assemble before filing their 2025 return. Keep in mind, some of these documents are for taxpayers who itemize deductions. This checklist also can be helpful in determining whether itemizing or the standard deduction are right for you.

                We will break down 1) Income, 2) Deductions, 3) Credits, and 4) Other. Each section lists out a number of simple Yes or No questions to help you get started. If yes, read the sub-bullet, if no move onto the next question.

                If you have any questions, feel free to contact the team. Let’s dive in!

                  I) 2025 Tax Return — Income (Yes or No)

                  Did you earn wages as an employee?

                  • If so, collect Form(s) W-2, including all copies (i.e., showing all boxes, states, localities, etc.).

                  Did you receive or recognize equity compensation (including Section 83(b) elections)?

                  • If so, collect Form(s) 3921 and/or 3922, and be mindful of any adjustments that may be needed (e.g., cost basis, employee discounts, holding period requirements, etc.).

                  Did you earn income as a self-employed individual?

                  Did you have taxable investment accounts and/or interest-bearing accounts?

                  • If so, collect Form(s) 1099-B, 1099-DIV, 1099-INT, 1099 Consolidated or Composite, “Corrected 1099s”, etc. Verify that your cost basis and holding period details for investment sales are shown correctly on your tax forms.

                  Did you make any withdrawals from a retirement plan or insurance policy (including rollovers, Roth conversions, etc.)?

                  • If so, collect Form(s) 1099-R and ensure your tax preparer is aware of any special circumstances (e.g., after-tax basis, rollovers, penalty exceptions for early withdrawals, charitable donations, etc.).

                  Did you receive any sources of retirement income (e.g., pension, annuity, Social Security, Railroad Retirement Board, etc.)?

                  Did you sell your home (or other real estate)?

                  • If so, gather Form(s) 1099-S (if applicable) and documentation of your cost basis (e.g., purchase and sale statements, previous improvements, depreciation, etc.) and be mindful of any exclusions that may apply based on your ownership and usage of the property.

                  Did you receive alimony (excluding child support, property settlements, etc.) from a divorce finalized before 01/01/2019?

                  • If so, gather any relevant details (e.g., alimony received, date of agreement, etc.) and provide the alimony payer with your Social Security number.

                  Did you receive any other sources of income (e.g., income from IRS Schedule 1 Part 1)?

                  • If so, gather any tax forms and/or other details that may apply.

                    II) 2025 Tax Return — Deductions (Yes or No)

                    Are you self-employed?

                    • If so, gather documentation of all deductible business expenses (including home office use, vehicle use, health insurance premiums, long-term care premiums, etc.) relating to your business income and any applicable QBI deduction.

                    Did you contribute to any retirement plans or other tax-advantaged accounts (e.g., 401(k), IRA, Roth IRA, HSA, 529, etc.)?

                    • If so, gather documentation of any contributions you’ve made. Be mindful of any deadlines to remove excess contributions (if applicable) in order to avoid penalties.

                    Did you make any donations to a qualifying charity (including cash, non-cash property, stock, etc.)?

                    • If so, gather details regarding any donations, including valuation details (for gifts of non-cash property).

                    Did you pay a significant amount of medical expenses?

                    • If so, gather any relevant details (e.g., amounts paid, insurance or HSA/FSA reimbursements, etc.), but be mindful of limitations (i.e., 7.5% AGI floor) on claiming these deductions.

                    Did you pay state and/or local taxes (e.g., income, sales, property, etc.)?

                    • If so, gather details on the amounts paid to help with claiming the SALT deduction, subject to applicable limits under current law.

                    Did you receive income from overtime and/or tips?

                    • If so, make sure to gather any pertinent information (e.g., year-end pay stubs, documented tips, etc.) that may be relevant for tax reporting or potential exclusions, if applicable.

                    Did you pay interest on a mortgage, home equity loan, or home equity line of credit?

                    • If so, gather Form(s) 1098 and any other relevant documentation (interest paid, points paid, origination dates, balances, etc.).

                    Did you pay interest on a new vehicle that was assembled in the US?

                    • If so, gather any pertinent info (e.g., a loan statement showing interest paid, VIN, etc.) that may be needed to determine eligibility for this deduction, if applicable.

                    Did you pay any interest on qualified student loans?

                    Did you pay alimony (excluding child support, property settlements, etc.) from a divorce finalized before 01/01/2019? 

                    • If so, gather any relevant details (e.g., alimony paid, date of agreement, etc.) and make sure you have the alimony recipient’s Social Security number.

                    Are there any other deductions that may apply to you (e.g., deductions from IRS Schedule 1 Part 2)?

                    • If so, gather relevant details to substantiate your deductions.

                      III) 2025 Tax Return — Credits (Yes or No)

                      Do you have any children (including adopted) or other dependents?

                      • If so, gather documentation to establish dependency status (e.g., age, relationship, support, custody agreements, Form(s) 8332, etc.) and substantiate costs paid (e.g., childcare, education, adoption expenses, etc.).

                      Did you, your spouse, or your dependents incur any qualifying education expenses?

                      Did you buy an electric vehicle and/or make an energy-efficient home improvement?

                      • If so, collect any relevant documentation (e.g., receipts, manufacturer certifications, etc.).

                      Did you, your spouse, or your children obtain health insurance through the Marketplace?

                      • If so, gather Form(s) 1095-A. Be mindful of any premium tax credits you may owe back (if your income was higher than what you reported to the marketplace initially), and consider strategies that may reduce your MAGI (e.g., deductible IRA contributions, etc.).

                      Did you make any estimated tax payments, or did you apply a tax overpayment from last year toward this year’s tax liability?

                      • If so, gather documentation of all payments (e.g., amounts, dates paid, whose name payments were made in, etc.).

                      Are there any other tax credits that may apply to your situation (e.g., foreign earned income, AMT carryforward, etc.)?

                      • If so, gather relevant details to substantiate your credits.

                        IV) 2025 Tax Return — Other (Yes or No)

                        Did you make a gift in excess of the annual gift exclusion amount for 2025 ($19,000)?

                        • If so, be mindful of any gift tax reporting requirements that may apply (e.g., Form 709), as well as any elections that may reduce your gift tax liability (e.g., gift-splitting, 529 5-year averaging, etc.).

                        Did you make Qualified Charitable Distributions (QCDs) from your IRA?

                        • If so, be mindful that Form(s) 1099-R will report the full IRA distribution (including QCDs), but the QCD amount may be excluded from taxable income on Form 1040, line 4b (if eligible).

                        Did you make any non-deductible Traditional IRA contributions (i.e., for Backdoor Roth purposes) this year?

                        • If so, ensure that all contributions (i.e., your basis) are properly reported (for current and previous tax years), and document the value of any Traditional IRAs as of the end of the year.

                        Do you own a rental property?

                        • If so, review your property value (as compared to land value) to determine any depreciation deductions you may be able to claim. Gather details of your time spent on rental activities (e.g., personal vs. rental usage) as well as details regarding any rental income and/or expenses.

                        Do you co-own a business (or solely own a business taxed as an S-Corporation)?

                        • If so, be mindful of any additional business tax returns (e.g., Form(s) 1120-S, 1065, etc.) that may need to be finalized before you can finalize your personal tax filings, and be prepared to request a tax filing extension if necessary.

                        Do you have a Solo 401(k), and was the balance more than $250,000 as of 12/31/2025?

                        • If so, you may be required to file Form 5500-EZ by 07/31/2026 (for calendar year plans).

                          Conclusion

                            If you are unsure whether something applies to your situation, it is better to collect it and review it with an Asset Strategy Advisor. A little organization now can help you file confidently and keep more of what you’ve earned!


                                You can schedule a free 20-minute Discovery Call with Bruce Hardy, Director of Private Asset Management at Asset Strategy, to explore your best options:
                                Schedule Here 

                                Stock and Bond Volatility Highlights the Value of Dollar Cost Averaging

                                Stock and Bond Volatility Highlights the Value of Dollar Cost Averaging

                                The investment world can change fast. In the Spring of 2025, some financial experts (not us!) expected the Federal Reserve to raise interest rates to preempt tariff-induced inflation. Bond yields were climbing, and stock markets were pulling back after a strong start to the year.

                                But the situation has shifted again. Economic growth is projected to slow down, and the Fed is now easing short-term interest rates. At the same time, the U.S. government faces the challenge of managing nearly $38 trillion in debt, adding pressure to the bond market.

                                There’s more. Global trade tensions are abnormally high. And technology stocks – which had driven much of the market’s gains in recent years – are at, or near, all-time high prices.

                                These factors—rising debt concerns, bond market and trade uncertainty, and tech sector valuations—have made both stock and bond markets more volatile. No one could have predicted how quickly things would change. That’s why MoneyLetter continues to advise investors to stay calm and think long-term. One smart strategy to consider during uncertain times is dollar cost averaging (DCA).

                                What is dollar cost averaging?

                                Dollar cost averaging means investing a fixed amount of money at regular intervals, like monthly or quarterly, into mutual funds or other investments. The amount you invest stays the same, but the number of shares you buy changes depending on the price.

                                When prices are low, you end up buying more shares. When prices are high, you buy fewer. Over time, this often results in buying more total shares than if you had invested all your money at once.

                                 

                                Dollar Cost Averaging Example

                                Why dollar cost averaging works

                                DCA takes emotion out of investing. It helps you avoid the fear of missing out when prices rise and the panic of selling when prices fall. While it’s possible that investing a lump sum at the right time could earn more, it’s very hard to know when that “right time” is. Trying to time the market precisely usually doesn’t work.

                                If you’re still working and saving for retirement or college, DCA is a great way to build wealth over time. If you receive a lump sum—like a bonus or inheritance—DCA lets you ease into the market slowly, reducing risk. If you have a 401(k) plan at work, you’re already using DCA. Money is taken from your paycheck and invested regularly, no matter what the market is doing.

                                DCA works best with no-load mutual funds or ETFs, which don’t charge commissions. It’s especially helpful during times of market ups and downs, like we’ve seen recently. While markets can struggle for a while, they tend to grow over the long term.

                                What if you need cash?

                                Sometimes, you may need to take money out of your investments, maybe to build an emergency fund or to cover living expenses in retirement. Selling investments using a DCA-like method (selling the same amount regularly) is not a good idea. This is called reverse dollar cost averaging, and it can hurt your portfolio. You end up selling more shares when prices are low and fewer when prices are high, which can reduce your future growth.

                                Instead, here are some smart ways to raise cash during market volatility:

                                • Rebalance your portfolio: If stocks have dropped and bonds now make up a bigger part of your portfolio, consider selling some bonds first.
                                • Review your investments: You might have holdings that no longer fit your goals or have underperformed. These could be good candidates to sell.
                                • Harvest tax losses: If you have investments that are worth less than what you paid, selling them can help offset gains or reduce your taxable income (up to $3,000 per year).
                                • Think about taxes: If you must sell investments for a gain, try to sell those you’ve held for over a year. Long-term capital gains are taxed at a lower rate than short-term gains.

                                If you have any questions, feel free to email us at service@moneyletter.com.

                                 

                                 


                                You can schedule a free 20-minute Discovery Call with Bruce Hardy, Director of Private Asset Management at Asset Strategy, to explore your best options:
                                Schedule Here 

                                Should Investors Be Worried About the U.S. Government Shutdown?

                                Should Investors Be Worried About the U.S. Government Shutdown?

                                Should Investors Be Worried About This Government Shutdown? On October 1st, 2025, the U.S. government officially shut down for the 22nd time since 1976. While these events grab headlines and stir political drama, investors naturally wonder if this poses real risks to their portfolio?

                                Well, the short answer to that is that history shows government shutdowns have limited and temporary effects on the markets and the economy.

                                Don’t believe us? Here’s exactly why this is true.

                                How Often Do Government Shutdowns Occur?

                                Shutdowns aren’t rare. Since 1981, there have been 10 shutdowns, with the average lasting about 9 days. 

                                The longest, which was 34 days in 2018–2019, cost the economy around $11 billion in GDP, but only $3 billion was permanently lost. That amounted to roughly 0.02% of GDP, which was barely a blip in the long run.

                                What Happens During a Government Shutdown?

                                When Congress fails to pass appropriations legislation or a continuing resolution, non-essential federal government operations are suspended, and many employees are furloughed.

                                However, it’s important to keep in mind that many functions continue to operate.

                                • Mandatory spending obligations like Social Security, Medicare, and Medicaid are typically unaffected. 
                                • Essential services (e.g. air traffic control, national security, disaster relief) operate under “excepted” status.
                                • Other agencies will scale back or halt discretionary operations, delay permits, or shutter public-facing services.

                                The Market’s Reaction to a Government Shutdown? 

                                You’d be surprised to know that markets have taken shutdowns in stride. 

                                Stocks sometimes sell off modestly before a shutdown and often rally once it begins. 

                                While, bond yields typically tick higher before the deadline, then fall back during the shutdown. 

                                In fact, after the 2013 and 2018 shutdowns, the S&P 500 experienced strong gains in the 100 days following the government shutdown’s end. 

                                So, investors tend to see shutdowns more as short-term political theater than something that is going to impact the markets long term.

                                What About This Current Government Shutdown? 

                                This government shutdown may be slightly different than some of the previous ones we’ve had in the past. 

                                The government may stop releasing key economic data, which includes the September jobs report and inflation figures. 

                                That’s going to become a headache for the Federal Reserve, which relies on this data to guide interest rate decisions. 

                                So, it may add some short-term uncertainty for investors.

                                Should Investors Be Worried About This Government Shutdown? 

                                In the short term, some volatility is possible, especially with stocks near all-time highs. 

                                But In the long term, shutdowns have not derailed economic growth or market performance. 

                                So, we think that as long as you maintain a diversified portfolio, block out the noise, and rebalance if we experience some volatility, then you should be well-equipped. 

                                If you have any questions, feel free to email us at service@moneyletter.com.

                                 

                                Visit our Contact page to click the button below to speak with the Asset Strategy Advisor Team.

                                You can schedule a free 20-minute Discovery Call with Bruce Hardy, Director of Private Asset Management at Asset Strategy, to explore your best options: Schedule Here 

                                Smart IRA Strategies: Maximizing Legacy and Minimizing Taxes 

                                Smart IRA Strategies: Maximizing Legacy and Minimizing Taxes 

                                Many IRA owners are unknowingly setting up their heirs for a hefty tax bill. With the SECURE Act eliminating the stretch IRA and tax rates likely to rise in the future, proactive planning is more important than ever. If you want to leave a lasting financial legacy, consider these three strategies to protect your wealth from excessive taxation.

                                 

                                Understanding the “Legacy” Camp 

                                A few years ago, we attended a presentation by Ed Slott, CPA, “America’s IRA Expert.” He explained that IRA owners generally fall into two camps:

                                Non-Legacy Camp – These account holders plan to use their IRA assets for their lifetime income needs.

                                Legacy Camp – These individuals have other income sources and want to minimize required withdrawals to leave as much as possible for their heirs.

                                For those in the legacy camp, traditional IRAs are not the most tax-efficient way to pass down wealth. IRA assets are subject to both income tax and potential federal or state estate taxes. Additionally, with the national debt exceeding $37 trillion, it’s unlikely tax rates will be lower in the future than they are today. That’s why it may be beneficial to withdraw IRA funds strategically now, rather than allowing them to grow tax-deferred only to be taxed more heavily later.

                                We will explore three key strategies to help legacy-focused IRA owners: 1) Roth conversions to eliminate future tax uncertainty; 2) Life insurance planning using ILITs (Irrevocable Life Insurance Trusts); 3) Charitable planning strategies using Qualified Charitable Distributions (QCDs).

                                 

                                Roth conversions: Locking in lower taxes 

                                Many people hesitate to convert their IRA to a Roth, fearing it will push them into a higher tax bracket. However, strategic Roth conversions allow you to manage your taxable income while locking in today’s lower tax rates. For example, let’s say a married couple in 2025, both over age 59½, files jointly and falls within the 22% tax bracket. They have room before reaching the higher 24, 32, 35 or even top 37% bracket (at $751,600). By strategically converting a portion of their IRA each year, they can spread the tax burden while securing tax-free withdrawals in the future.

                                Why Consider Roth Conversions?

                                Future Roth distributions are tax-free and do not impact Social Security taxation or Medicare premiums.

                                No Required Minimum Distributions (RMDs) from Roth IRAs.

                                Reduces the taxable portion of your estate.

                                For more information, visit the Retirement Planning section on Asset Strategy’s Financial Guides. You can also reference Schedule 1, Part II, Line 26 of your tax return, which carries over to Line 10 on the front page of your 1040 (IRS Form 1040).

                                 

                                Life insurance planning using ILITs 

                                Life insurance is one of the most tax-efficient assets to leave to heirs. Unlike IRAs, which are subject to income and estate tax, life insurance benefits pass to beneficiaries tax-free.

                                An Irrevocable Life Insurance Trust (ILIT) removes life insurance from your taxable estate while protecting it from creditors, lawsuits, and divorce claims. IRA owners can use taxable distributions or RMDs to fund the ILIT, converting tax-inefficient IRA dollars into a tax-free inheritance.

                                Key Benefits of Life Insurance Planning:

                                • Tax-free death benefits to heirs.
                                • Protection from estate taxes and liabilities.
                                • Modern policies offer riders for long-term care and critical illness.
                                • Since people are living longer, life insurance costs have become more competitive. This strategy can significantly enhance the amount left to heirs while minimizing taxes.

                                 

                                Charitable planning strategies with QCDs 

                                Qualified Charitable Distributions (QCDs) allow IRA owners to donate up to $108,000 per year in 2025 (indexed for inflation) directly to qualified charities. This approach lowers taxable income while benefiting charitable organizations. Private family foundations, donor-advised funds (DAF), or charitable remainder trusts (CRT) do not qualify.

                                 

                                Why Use a QCD?

                                • Satisfies your RMD requirement.
                                • Lowers your Adjusted Gross Income (AGI), reducing the impact on Medicare premiums and Social Security taxation.
                                • No need to itemize deductions to receive tax benefits.

                                Each spouse can donate up to the $108,000 limit, meaning a married couple could contribute up to $216,000 tax-free. However, QCDs must be made from an IRA—employer retirement plans are not eligible.

                                 

                                Putting it all together 

                                By combining Roth conversions, ILITs, and QCDs, you can maximize your financial legacy while minimizing taxes. Consider which strategies align with your long-term goals and whether your IRA is earmarked for personal retirement income or wealth transfer. Given today’s historically low tax rates, acting now can provide significant benefits in the future.

                                Visit our Contact page to click the button below to speak with the Asset Strategy Advisor Team.


                                You can schedule a free 20-minute Discovery Call with Bruce Hardy, Director of Private Asset Management at Asset Strategy, to explore your best options:
                                Schedule Here