First Quarter – 2025
Advisor Desk
As we close out the first quarter of 2025, uncertainty is everywhere, but we’re energized by the momentum building within the SFA community and your interest in learning more about the markets. Our recent webinar, Investing in Times of Uncertainty, sparked thoughtful discussion and reinforced the value of staying informed and steady in a shifting market landscape as a DIY investor. We’ve included a link to the recording below for those who missed it or want to watch it again.
The aforementioned uncertainty fueled significant daily volatility across global markets in Q1. While the swings have been large, the S&P 500 experienced a ~5% total decline this quarter, reflecting investor concerns over the Trump administration’s tariff strategies and their potential impact on the economy. In contrast, gold prices surged past $3,100 per ounce for the first time, reaching a record high of $3,159, as investors seek safe-haven assets amid escalating trade tensions and inflation worries.
European markets showed a rare resilience with a positive quarter buoyed by significant spending plans, particularly in defense sectors. Whether the outperformance of European markets has legs is yet to be seen. For the data nerds, we included an article this month that shows some of the metrics on historical risk and return performance of US vs. International markets. Meanwhile, U.S. Treasury bonds provided a 2.7% return, indicating a cautious investor sentiment towards equities, and 30-year mortgage rates dropped to 6.65%. These developments highlight the importance of diversification and a strategic approach to asset allocation in navigating the current financial landscape. While it can be easy to make big changes to your asset allocations, changing your allocation should be akin to turning a cruise ship, not a jet ski.
We’re also thrilled to share updates on our upcoming conference, where we’ll delve deeper into many of these themes. This conference gets better and better every year, and based on the lineup of topics, this year is no exception. You can read more about the conference, markets, and our webinar below.
As always, we appreciate your trust as your source of financial advice and we are available if you ever have any questions on how any of these market factors affect your personal financial plan. Enjoy the April showers and the May flowers, but try to avoid focusing too much on the day-to-day market volatility this spring.
– Stephan
Stephan Shipe, Ph.D., CFA, CFP® is the Founder and CEO of Scholar Financial Advising.
SFA Announcements
We recently completed an annual update of our disclosures.
Here are the related links for your reference:
Form ADV / Part 2 Brochure / CRS
2025 SFA Conference Reminder
Get Ready for our 2025 Personal Finance Conference!
We’re thrilled to announce that our highly anticipated 2025 Personal Finance Conference is right around the corner, happening June 11th–13th in beautiful Charleston, South Carolina!
Mark your calendars now!
We’re kicking things off with a lively Client Reception, followed by two days of dynamic speakers and insightful discussions.
This is an exclusive, client-only event and spots are limited.
Don’t wait to RSVP. We can’t wait to see you there!This event is provided free of charge and only available to our current clients.
Contact us for more information.
Webinar: Investing in Uncertain Markets
If you missed out on our recent webinar, Investing in Times of Market Uncertainty, you can still catch it on demand. Learn how to manage risk, stay confident in volatile markets, and make tax-efficient moves.
Watch the recording, view the webinar slides, and share it with anyone who may benefit.
Help Others Benefit from Trusted Financial Guidance
When it comes to financial decisions, having the right guidance can bring clarity and peace of mind. If our work together has made a positive impact on your financial life, we invite you to share that experience with the people you care about.
Many friends, family members, and colleagues may be looking for the same trusted, objective financial advice. A simple introduction could help them make informed decisions and feel more secure about their financial future.
If someone comes to mind, you can connect us directly or pass along their information, and we’ll happily reach out to share how we can support them. Your referral is one of the greatest compliments we can receive, and we’re grateful for your trust.
Things We Are Watching
Phil Ferrara, CFP®, CRPC®
Paraplanner
- The Fed has held rates steady as inflation remains stubborn despite earlier expectations of multiple cuts. We are tracking economic data to determine whether the easing policy will be on the table for later this year.
- Consumer staples have outperformed consumer discretionary stocks in 2025 by over 10% year to date, reflecting a shift toward safety. Will this trend continue?
- While GDP growth was positive in late 2024, weaker manufacturing, consumer sentiment, and corporate earnings raised concerns. We are watching for signs of a recession or a potential soft landing.
- European markets like the German DAX, French CAC 40, and Spanish IBEX 35 have outperformed U.S. stocks recently as investors rotate away from the “Magnificent 7” (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, & Tesla). We are monitoring whether this trend continues and what its implications are for global asset allocation.
- The S&P 500 had fallen 10% from its February highs by mid-March, entering correction territory, but rebounded. We are watching whether markets stabilize or if further declines push equities into a bear market.
What We Are Reading
Ask a Paraplanner
In this month’s edition, Phil Ferrara, CFP®, CRPC®discusses the topic:
Self-Employed Retirement Accounts
Self-employed individuals and those with side income have several retirement savings options, but two of the most popular are the Solo 401(k) and SEP (Simplified Employee Pension Plan) IRA. Each offers tax advantages, but they have key differences in contribution limits, flexibility, and their impact on Roth strategies. Understanding these distinctions can help maximize retirement savings while optimizing tax benefits.
Deciding between a Solo 401(k) and a SEP IRA depends on several factors:
Your Income and Contribution Goals:
- A Solo 401(k) allows higher contributions at lower income levels since you can contribute both as an employee and employer. In 2025, the maximum you can contribute to a solo 401(k) is $70,000, including both employee ($23,500) and employer contributions (~25% of net self-employment income), with an additional $7,500 catch-up contribution available for those age 50 and older.
- A SEP IRA limits contributions to 25% of net self-employment income, which may not be as advantageous for lower earners. For the 2025 tax year, you can contribute up to the lesser of 25% of an employee’s compensation or $70,000 to a SEP-IRA, with the maximum compensation considered being $350,000. SEP IRAs do not offer catch-up contributions, unlike other retirement plans.
Do You Want a Roth Option?
- A Solo 401(k) allows Roth contributions, meaning you can choose tax-free withdrawals in retirement.
- A SEP IRA historically only allowed pre-tax contributions, but under SECURE 2.0, some providers may allow Roth SEP IRA contributions next year.
Do You Plan to Do a Backdoor Roth IRA or Mega Backdoor Roth?
- A SEP IRA affects the pro-rata rule, making a Backdoor Roth IRA less tax-efficient.
- A Solo 401(k) does not count toward the pro-rata rule, making it a better option if you want to use a Backdoor Roth IRA strategy.
Mega Backdoor Roth Strategy: Some Solo 401(k) plans allow after-tax contributions, which can be converted into a Roth 401(k) or rolled into a Roth IRA tax-free, significantly boosting tax-free retirement savings.Do You Need Flexibility?
- A Solo 401(k) allows loans, giving access to emergency funds.
- A SEP IRA does not permit loans.
Do You Have Employees?
- A Solo 401(k) is only available to business owners with no employees (except a spouse).
- A SEP IRA is a good option if you plan to hire employees since contributions can also be made for them.
How should you decide how much to contribute? Your contribution strategy should be based on:
- Your expected income and tax situation for the year.
- Whether you want to contribute pre-tax or Roth (Solo 401(k) only).
- If your goal is to reduce taxable income, maximizing pre-tax contributions can help.
- Avoiding a SEP IRA is best if you plan to use a Backdoor Roth IRA.
Are there any other things to consider?
- Tax Filing Requirements: A Solo 401(k) requires IRS Form 5500-EZ once assets exceed $250,000. A SEP IRA has no annual filing requirements.
- Deadlines: SEP IRA contributions can be made up until the tax filing deadline (including extensions), while Solo 401(k) contributions should be made by year-end (employee portion). Depending on your business type, the Secure 2.0 Act has created additional flexibility with solo 401(k) contribution deadlines.
- Investment Choices: Both plans offer flexibility in investments
- The precise calculation for an employer contribution to a solo 401(k) depends on your business type
If you’re self-employed or have side income, choosing the right retirement plan can significantly impact your tax savings and long-term wealth. If you’re unsure which plan is best for you, let’s discuss your situation and find the most effective strategy.
Reminders
Need more help?
Contact us to inquire about professional recommendations, including CPAs.
When should you contact us outside of your annual meeting?
Anytime you have a build up of cash, change your job, make or consider a major purchase, relocate, or are concerned about the allocation of your portfolio.
Reach out anytime with questions or to schedule a meeting.
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