October Monthly Insights: The Fed Hike, Year-End Giving Under the New Tax Rules, and Medicare Open Enrollment

Hi there,

On Tuesday, September 22, my co-founder Shuo Li, CFP®, and I hosted our webinar "Keep More of Your TSP: A Tax Playbook for Federal Pre-Retirees." Thank you to everyone who joined and brought questions. If you missed it and would like the recap, just reply to this email.

October is when the fourth quarter planning season begins in earnest: the Fed has changed direction, Medicare open enrollment opens on October 15, and the window for 2026 charitable and Roth decisions closes on December 31. Here are three topics worth a closer look this month. You may reply to this email at any time to opt out of the monthly newsletter.

In this issue

• The Fed hiked. Volatility is here, and so are 5% Treasury yields
• Year-end giving under the 2026 rules
• Medicare open enrollment starts October 15, and the numbers that drive your premium

1. The Fed hiked. Volatility is here, and so are 5% Treasury yields ^[1]

Last month we said a quarter-point rate increase on September 16 was a real possibility. It happened. The Federal Open Market Committee voted 12 to 0 to raise the federal funds rate to a range of 3.75% to 4.00%, the first increase since 2023. The Fed's own projections show 16 of 18 officials expect at least one more hike before year-end. The Fed still sees unemployment holding near 4.1%, so this is a hike aimed at inflation, not a response to a weakening economy.

The Fed was not alone: the European Central Bank raised rates on September 16 and the Bank of Japan raised its policy rate to 1.25% on September 18, the highest since 1995. It was the first time in this cycle that all three tightened in the same month.

Bond markets moved further than stock markets. The 10-year Treasury yield, which was just under 5% the morning of the Fed meeting, closed at 5.17% on September 25, its highest level since 2007. Stocks, by contrast, absorbed the news: the S&P 500 closed at 7,743 on September 25, up about 13% for the year. Small-cap stocks have felt the rate pressure most. The Russell 2000 had been the year's leader through mid-September, but it has fallen roughly 4% since the 10-year yield broke above 4.75%, and small companies carry more floating-rate debt than large ones. LPL Research's study of the past six hiking cycles since 1994 found that the first months after an initial hike tend to be choppy, with small caps lagging large caps, but that stocks were higher one year later in most cases when the economy was growing, as it is now.

What we are doing, and what we think you should consider:

• We are not making big moves on the equity side. We keep our balanced approach and a tilt toward higher-quality large-cap companies. The next Fed meeting is October 27 to 28, and we expect more swings in both stocks and bonds around it.
• Bonds are more attractive than they have been in almost twenty years, and this is the part of the portfolio where we are acting.
• If you are sitting in a money market fund because it felt safe, note that short rates will likely follow the Fed down when this cycle eventually turns, while a bond bought today locks in its yield for as long as you choose. For many households, a reasonable consideration would be extending a portion of cash into a bond.

2. Year-end giving under the 2026 rules ^[2]

The fourth quarter is when most charitable giving happens, and 2026 is the first year the charitable provisions of last year's tax law (the One Big Beautiful Bill Act) apply. Three changes matter for our clients:

• If you itemize, the first 0.5% of your adjusted gross income (AGI) in charitable gifts is no longer deductible. With $400,000 of AGI, the first $2,000 of giving earns no deduction, and the disallowed amount does not carry forward.
• If you are in the top 37% bracket, the value of your itemized deductions, including charitable gifts, is capped at 35 cents per dollar.
• If you do not itemize, you can now deduct up to $1,000 ($2,000 for a married couple) of cash gifts to public charities. Gifts to donor-advised funds and gifts of stock do not qualify for this new deduction.

Against that backdrop, one of the most tax-efficient ways to give for anyone age 70½ or older is a qualified charitable distribution (QCD): a transfer paid directly from a traditional IRA to a charity. The 2026 limit is $111,000 per person ($222,000 for a married couple with separate IRAs). A QCD is never counted as income, so it is not subject to the new 0.5% floor or the 35% cap, and it counts toward your required minimum distribution (RMD). Because it keeps AGI down, it also helps with the Medicare premium surcharges and with how much of your Social Security is taxed.

A few practical notes:

• Federal employees: the TSP does not process QCDs. If you want to give from retirement money, the funds must first be transferred to an IRA.
• Timing. A QCD must be paid out of the IRA by December 31, and some custodians take two to three weeks to issue the check. Stock transfers to a charity or a donor-advised fund can take longer. Please start by early December.

3. Medicare open enrollment starts October 15, and the numbers that drive your premium ^[3]

A recent survey of financial planning clients found rising consumer costs to be their top concern, with healthcare at the front of the list. October is the month to act on it. Medicare open enrollment runs from October 15 through December 7 for coverage that begins January 1, 2027. If you have a Medicare Advantage or Part D drug plan, you should have received an Annual Notice of Change by the end of September; it lists the premium, deductible, drug list, and network changes for 2027. Plans are changing more than usual this year, and some are leaving certain counties, so please read it rather than filing it.

Two numbers to know:

• The standard Part B premium is projected to rise to about $209.50 a month in 2027, from $202.90 in 2026. The 2027 Part A hospital deductible is projected at $1,788. The final figures normally come from Medicare in late October or November.
• The 2027 Social Security cost-of-living adjustment will be announced around October 14, once September inflation data is released. Current estimates run from 3.4% to 3.6%, which would be the largest increase since 2023, up from 2.8% this year. The Part B premium increase will absorb part of it.

If you are under 65 and buying coverage on the Affordable Care Act marketplace, that open enrollment starts November 1. The premium tax credit depends on your 2027 income estimate, so a retiree drawing from a taxable account, an IRA, or Roth savings has real control over the credit. This is a planning conversation, not a form-filling exercise.

If any of these topics are on your mind, I'm happy to help you think through your priorities and next steps. Just reply to this email.

Sources

1. [1] Federal Reserve, FOMC statement, September 16, 2026 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm); Federal Reserve, Summary of Economic Projections, September 16, 2026 (https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20260916.htm); Federal Reserve, FOMC meeting calendar (https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm); Bureau of Labor Statistics, Consumer Price Index, August 2026 (https://www.bls.gov/news.release/cpi.nr0.htm); CNBC, "CPI inflation report August 2026," September 11, 2026 (https://www.cnbc.com/2026/09/11/cpi-inflation-report-august-2026.html); Federal Reserve H.15 Selected Interest Rates, September 25, 2026 (https://www.federalreserve.gov/releases/h15/); CNBC, "The 10-year Treasury yield is at its highest in nearly two decades," September 26, 2026 (https://www.cnbc.com/2026/09/26/10-year-treasury-yield-is-at-its-highest-in-19-years-how-we-got-here.html); CNBC, "Bank of Japan raises interest rates to 31-year high," September 18, 2026 (https://www.cnbc.com/2026/09/18/japan-raises-rates-30-year-high-yen-jgb.html); Yahoo Finance, S&P 500 historical data (https://finance.yahoo.com/quote/%5EGSPC/history/); LPL Research Daily Market Update, September 14, 2026, "The Fed Will Hike. But Does It Matter?", September 17, 2026, "A Hawkish Fed, a Two-Speed China," and September 18, 2026, "The Fed Hiked, What Does This Mean for Small Caps?" (advisor distribution).
2. [2] IRS, Retirement plan FAQs on IRA distributions, qualified charitable distributions (https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals); IRS Notice 2025-67, 2026 inflation adjustments including the QCD limit (https://www.irs.gov/pub/irs-drop/n-25-67.pdf); Fidelity, "Qualified Charitable Distributions (QCDs)" (https://www.fidelity.com/retirement-ira/required-minimum-distributions-qcds); Fidelity Charitable, "One Big Beautiful Bill: Impact on Charitable Giving" (https://www.fidelitycharitable.org/articles/obbb-tax-reform.html); Bipartisan Policy Center, "How the New Charitable Deduction Floors Work" (https://bipartisanpolicy.org/issue-brief/how-the-new-charitable-deduction-floors-work/); Kitces, Weekend Reading for Financial Planners, September 19 to 20, 2026 (https://www.kitces.com/blog/weekend-reading-for-financial-planners-september-19-20-2026/); Thrift Savings Plan, "Tax Rules about TSP Payments," TSPBK26 (https://www.tsp.gov/publications/tspbk26.pdf).
3. [3] Medicare.gov, Open Enrollment (https://www.medicare.gov/health-drug-plans/open-enrollment); Medicare Rights Center, "2026 Medicare Premiums Announced," November 20, 2025 (https://www.medicarerights.org/medicare-watch/2025/11/20/2026-medicare-premiums-announced-last-weeks-of-open-enrollment); Kiplinger, "Projected 2027 IRMAA Brackets and Surcharges for Medicare Parts B and D" (https://www.kiplinger.com/retirement/medicare/medicare-premiums-irmaa-brackets-and-surcharges-part-b-and-d-2027); Yahoo Finance, "Medicare is changing in 2027: 7 things seniors need to know before open enrollment" (https://finance.yahoo.com/healthcare/articles/medicare-changing-2027-7-things-145726265.html); CNBC, "Social Security COLA for 2027 may be 3.5% to 3.6%," September 11, 2026 (https://www.cnbc.com/2026/09/11/social-security-cola-2027-estimate.html); Social Security Administration, Form SSA-44 (https://www.ssa.gov/forms/ssa-44.pdf); HealthCare.gov, open enrollment (https://www.healthcare.gov/); Kitces, Weekend Reading for Financial Planners, September 26 to 27, 2026 (https://www.kitces.com/blog/weekend-reading-for-financial-planners-september-26-27-2026/).

Sincerely,
Danni Shen, CFA® | Co-founder / CIO, Allset Wealth | Financial Planner

https://www.allsetwealth.com/
909 Rose Ave. Suite 650 North Bethesda, MD. 20852
Work: (301) 547-4054 | Fax: (877) 840-2379
Cell: (240) 478-8077 (Voice Only)

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This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Economic forecasts set forth may not develop as predicted and are subject to change. Sector and asset class views are those of Allset Wealth and LPL Research as of the dates cited and are subject to change without notice. Projected 2027 Medicare premiums, deductibles, IRMAA thresholds, and the Social Security cost-of-living adjustment are estimates from the sources cited and are subject to official announcement.

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