​If you haven’t done so already, it’s time to get ready to file your taxes. Whether you use a tax professional or prepare your taxes yourself, the first step is to get organized, and a tax preparation checklist can help you do that. Here are some tips to help you get started. 

*Collect your income records :   Employers/companies send out W-2s and 1099s by the end of January.  Review these documents carefully as soon as you receive them; if you find a discrepancy, you have plenty of time to get a corrected document. 

*Collect copies of year-end bank, brokerage, and investment account statements:   These may contain needed cost-basis, transaction type, gain/loss information.  They can also serve as proof of IRA contributions. 

*Organize and validate your deductible expenses and eligible tax credits (some may include) :
*Work-related receipts
*Receipts/payment records for charitable donations
*Payment records of eligible medical co-payments
*Education costs/student loan interest
*Mortgage interest statement
*Homebuyer tax credit

*Check out one-time benefits that might apply:   Investments in certain energy-efficient products (such as water heaters, central air conditioners, new windows and doors, and insulation) could make you eligible for tax credits this year.  If you installed a solar energy system (or other type of renewable energy system) you may be eligible for a tax credit. Details about these types of tax credits are available at: www.energysavers.gov.

**Locate last year’s tax return:   You may need to reference important information for this year’s return.

Below is a recent article from MarketWatch.com -

​Commodities are rarely exciting—and the price of copper, corn, or even oil doesn’t stir investors the way a
tweet from Elon Musk does. Yet commodities sit at the crossroads of three of today’s biggest investment
themes—rising inflation, a changing China, and the transition away from fossil fuels amid increased attention to
climate change.

Barron’s highlighted this opportunity a year ago as commodities emerged from a decadelong bear market. It
was a good call: The Bloomberg Commodity Index rose 27% in 2021, its best year in decades. Those three big
trends are still going strong, so more gains could be ahead for some commodities, like oil, and agricultural
commodities such as corn. But the price run-ups mean that investors need to pick their spots carefully. The
factors affecting commodity prices—and determining which ones investors should focus on—often overlap and
have different short- and long-term implications. Actively managed funds are better able to spot and take
advantage of changing trends; for three good fund options, see this article.

Inflation
Inflation has been one of the biggest drivers of many recent economic and market trends. The most recent
consumer price index, or CPI, inflation report showed that prices rose across the board in November—by quite
a lot, 6.8%. And in December, the Federal Reserve acknowledged that inflation was indeed a sustainable
trend—not transitory—and that it’s moving ahead with plans to raise interest rates to battle inflationary
pressures. Even as the Omicron variant spreads, the world is snapping back from pandemic lockdowns. There
is pent-up demand for household items, corporate endeavors, municipal projects, and, of course, for the
commodities that are needed in all kinds of production. Meanwhile, many of those commodities are in short
supply. Add in supply-chain problems in getting those commodities into production and the produced goods to
the end user, and it’s no wonder that prices are rising.

Investors wanting to hedge against inflation, which makes stocks more volatile, have long turned to
commodities. It’s a broad “if- you-can’t-beat-’em, join-’em” strategy: If inflation is rising, the prices of
commodities are typically rising, as well, so part of your portfolio will benefit even as some investment returns
are muted. Energy futures have the best correlation with U.S. inflation, but over the long term, agriculture,
livestock, and industrial metals are all positively correlated. Since 2000, the Bloomberg Commodity Index’s
monthly year-over-year returns have had a 76% correlation with U.S. consumer-price-index data, according to
J.P. Morgan. And today’s inflation is driven by structural factors that are changing the economy, business, and
how we all live.

“Greenflation” is an additional factor driving inflation, and will benefit commodities needed for the green energy
transition—especially copper, which is used in all things digital; lithium, used for batteries; aluminum, used to
build solar panels and wind turbines; and cobalt, a catalyst for producing clean fuels. More companies and
governments are setting goals to reduce or eliminate the use of fossil fuels such as coal, oil, and natural gas.
These efforts are the basis for plans to become carbon neutral or “net zero” that many companies and nations
have made. These institutions are setting dates by which their operations won’t add to the release of carbon
dioxide into the atmosphere, and any emissions they do produce will be offset by green projects that reduce
carbon. These are costly, decadeslong plans that will change the supply-and-demand profile of many
commodities.

While inflation is a broad argument for investing in commodities, the influence of China—the biggest consumer
of commodities—the dynamics around specific trends, and the already big run-up in the prices of some
commodities mean that investors would benefit from a more targeted approach.

China

The health of the Chinese economy is one of the biggest determinants of commodity pricing—and the near-
term outlook isn’t great. The world’s second-largest economy was the primary driver for the last commodities

supercycle, as the country’s swift urbanization, aggressive stimulus after the financial crisis, and rapid
economic growth created voracious demand. The backdrop is very different today: China’s economic growth
has slowed to 5%, and its policy makers are focused more on creating a balanced, resilient economy than
unbridled growth. One example of this shift in priorities is Beijing’s crackdown on China’s debt-laden property
sector, by implementing fiscal regulations that pushed large property developers like China Evergrande
Group (ticker: 3333.Hong Kong) to the brink of bankruptcy, and left investors concerned that property problems
would drag the economy down even further.

“Instead of a country industrializing, we have a country that accounts for 55% of metals demand slowing
down,” says Natasha Kaneva, J.P. Morgan’s head of global commodities research.

Yet over the long term, China will remain a big driver of demand. Its property market accounts for 30% of the
global demand for copper, which means further gains in copper prices aren’t likely in the near future.
But metals, and especially copper, have a bright future as China embraces green technology. Beijing has
announced plans to be carbon neutral by 2060, a transition that will be years in the making and bodes well for
industrial metals used in electric vehicles. Just a fifth of the cars sold in China today are some type of electric--
think battery, plug-in, or hybrid—compared with 40% in Europe. Demand for EVs probably won’t rival demand
for traditional cars until after 2026, says Kaneva. Until China’s energy transition gets further along and its
property sector stabilizes, industrial metals are not the best near-term option for combating inflation or boosting
returns.

Energy, Green and Black
The energy transition is another big factor in commodity prices, and one that’s creating lots of opportunity. As
anyone who has raised a teenager knows, transitions can be difficult and full of conflict.

There are three big forces at work in energy prices: fuel shortages in the short term, the inexorable march
toward renewable energy in the longer term, and the increasing emphasis from U.S. companies and their
investors on environmental, social, and governance issues, known as ESG.

The three forces are interrelated. To achieve its goal of carbon neutral by 2060, Chinese policy makers put
restrictions on factories last fall—which resulted in a power shortage that disrupted already tight supply chains
and spurred inflation. Europe, meanwhile, is facing fuel shortages that could cause blackouts this winter, in
part because of its increasing reliance on wind energy and too few windy days in the past year.

In the U.S., alternative energy is in short supply, creating a backdrop for higher prices, thanks to two forces:
Demand for alternative energy has increased while big commodity companies have underinvested in their
businesses for years. That has created a shortage of old-school commodities like oil and copper. Expect these
shortages to continue as companies and countries around the world invest heavily in renewable energy,
decarbonization, and efforts to make buildings more energy efficient.

Investors have also increased their scrutiny of business practices, making it harder to mine for commodities
that are already in short supply. Rio Tinto CEO Jean-Sébastien Jacques and other senior executives resigned
after the company blew up a 46,000-year-old sacred Aboriginal site in Australia to mine iron ore. Likewise, the
best copper deposits have already been discovered, with remaining areas in locations rife with ESG
constraints, says Calvert ESG Senior Research Analyst Suleyman Saleem.

Such challenges have dissuaded energy and mining companies from funding big projects or ramping up
production as demand increased. Instead, companies have use their extra cash for share buybacks or higher
dividends, adding to the supply shortages—all of which point to higher commodities prices over the long term.
“The energy transition helps reinforce the commodities story,” says Nicholas Johnson, who oversees $19
billion in commodity and multi-asset strategies at Pimco and is a manager of the Pimco CommodityRealReturn
Strategy fund (PCRAX).
Agriculture
Higher energy prices cause some agricultural commodities to rise in price, as well. Farmers use petroleum to
power their tractors and other farm equipment, and fossil fuels are used to make fertilizer. The more expensive
these energy inputs are, the more likely it is that farmers will plant less or raise prices on their yield, which
leads to higher prices for commodities like corn, soybeans, and wheat.

Bigger trends are also at work, creating a backdrop for strong gains in agriculture commodities. From 2014 to
2021, the number of vegetarians in the U.S. rose 500%, increasing demand for pulses, soybeans, and
alternative protein sources like nuts and avocados, says Martin Davies, president and CEO of Westchester, a
Nuveen affiliate that invests directly in farmland. Low-carbon fuel standards in states like California, Oregon,
and Washington will cause greater demand for soybeans and sugar cane, which are used in biofuels, he adds.
Climate change has made extreme weather situations—a major source of volatility—more frequent, forcing
investors to rebuild their models using 10-year rather than 30-year averages. This underlines the need to own
a broad array of agricultural commodities, Davies says; diversification will ensure that your investment isn’t
dramatically affected by a single earthquake, tornado, or regulatory change.

The Technical Case
One of the factors that most excites investors is a technical feature that’s a byproduct of the broader industry
backdrop: Most commodities are in “backwardation,” which means prices for a commodity tomorrow are lower
than what it costs today. Backwardation is typically short-lived, but some investors expect it to persist,
particularly in the energy market, where it is a manifestation of the energy transition, shortages, and
underinvestment.

“It’s very different than in the supercycle 10 or 20 years ago, when the price of oil was $85 but no one knew
where the next barrel would come from—so there was an expectation for prices to rise,” says Johnson. Today,
the U.S. shale boom means the U.S. can increase energy supply easily, and the move toward renewables
means that energy prices are headed lower in the long run.
​
Johnson and other managers like backwardation because prices don’t need to rise to make money—managers
can earn a return just by rolling a contract over to the next one to realize an attractive “roll yield.” If an investor
buys the front-futures contract in oil at $80 but the one-year is trading at just $74, they can buy it for $6 less, so
even if the price remains the same, they have banked a 8% return. The average roll yield for the Bloomberg
Commodity Index is about 3.3%.

In last blogpost, we discussed what is a Roth 401K.  Now we will discuss Roth 401K's Pros and Cons.

The Pros
​Potentially tax-free growth
It can be complicated to quantify the value of potentially tax-free growth versus a current tax deferral. You don't know what your income will be in the future, nor what your tax rate will be.

If you expect your marginal rate to be at least as high after retirement as it is currently—which would apply to many younger participants who anticipate growing incomes over time—the Roth option could work in your favor over the long term.  This also sometimes applies to those who plan to move after retirement from a low-tax state to a high-tax state, say Texas to California.

It could also work out that the dollar amount difference in the taxes you'd pay by the time you get to retirement is very small, meaning the income tax you would pay per year on Roth 401(k) contributions could be roughly equal to what you'd pay eventually on distributions after 59½. Your age and your level of income will influence the bottom line.

Help with RMD concerns
Required minimum distributions (RMDs) apply to Roth 401(k)s in the same way they do to tax-deferred 401(k)s, meaning you'd have to start taking out a specified amount once you turn 72 if you are no longer working. However, once you are retired, you can roll over your plan into a Roth IRA, and then it would no longer be subject to the RMD rules (at least during the lifetime of the original owner), and you could withdraw the money on your own timetable.

Access to tax-free growth at higher income limits
High earners start getting restricted from making full Roth IRA contributions above $125,000 in modified adjusted gross income in 2021 for individuals and $198,000 for married couples filing jointly, and this will be $129,000 for individuals and $204,000 for couples in 2022. But Roth 401(k) plans follow 401(k) plan rules on this issue, which means there are no income restrictions.

You can also make higher contributions in a Roth 401(k) than a Roth IRA. An individual can put $6,000 into a Roth IRA per year, or $7,000 if over 50 in 2021 and 2022. In contrast, you can put $19,500 into a Roth 401(k) for 2021 and $20,500 for 2022, plus $6,500 catch-up if you're over 50 in both years. Or you can mix and match percentages and make some pre-tax contributions and some post-tax contributions. You can adjust throughout the year according to your needs and your plan specifications.

The cons
No tax deferral now
The list of cons may be short for Roth 401(k)s, but missing tax deferral is a big one. When faced with a choice of paying more tax now or later, most people choose to pay later, hence the low participation rates for Roth 401(k)s.

Encouraging people to save for retirement is important, and tax deferral has always been a key driver of savings. The financial justification for this has been that historically, people typically had lower tax rates in retirement than during their working years, and the math generally worked in their favor to have a lower adjusted gross income now and take taxable distributions in retirement.

There are a host of other reasons why a taxpayer might benefit from a lower adjusted gross income today, such as the calculation of child tax credits, financial aid for college, or divorce settlements. Then there is the impact on take-home pay.