Are Volatile Stock Markets Good for Investors?

Are Volatile Stock Markets Good for Investors?

When the ups and downs of stock markets leave you stressed and wondering whether stocks really will help you pursue your long-term financial goals, there are two things to remember:

 1.     Historically, over long periods, stocks have tended to move higher.

 ·       For instance, at the start of October 1987, the Standard & Poor’s (S&P) 500 Index was valued at 327. On Black Monday, October 19, the Index lost 22 percent in a single day. By the end of the month, it was trading at 247. Many investors wondered if their savings and investments would ever recover.1, 2

 By October 31, 2018, the S&P 500 was trading at 2,740.3

 ·       In March 2000, the bubble burst. On March 10, the NASDAQ Composite closed at 5,049 and less than a month later, on April 5, the Index was trading at 4,169 – a loss of about 17 percent. Many investors wondered if their savings and investments would recover.4, 5

 By October 31, 2018, the Nasdaq Composite was trading at 7,304.6

Let’s Talk About Long-Term Care Insurance

Let’s Talk About Long-Term Care Insurance

One of the most effective ways to protect your retirement savings from the high price of assisted living, in-home care or a stay in a nursing home is a long-term-care insurance policy.


•        Long Term Care is personal or custodial care assisting people with activities of daily living that include eating, bathing, dressing, using the restroom and moving from place to place

•        Skilled care is the treatment of medical conditions provided by licensed professionals such as nurses, therapists and physicians

•        These types of care may take place at home, in the community, in an assisted living facility or a nursing home

•        This care may be required as a result of chronic physical condition or illness, disability or cognitive impairment

•        Long-term care is one of the most overlooked retirement planning issues

•        Unlike medical and hospital care, most long-term care is not designed to cure medical conditions


Long term care insurance is designed to help you cover the costs of a nursing home or other skilled care as you age. As with most insurance policies, you must consider purchasing it before you need it.

The statistics vary but they all indicate that you are likely to need long-term care: 

·            Approximately 70% of those Americans who live to the age of retirement will need long-term care services at some point in their lives 1

 ·            42% of people in need of long-term care are 64 years old and younger 2

It’s Time to Talk About Aging

It’s Time to Talk About Aging

We are all, inexorably, marching toward old age. By 2030, 72 million Americans will be age 65 or older. The good news is longevity has been improving, and people are remaining healthy and vibrant at older ages.

 The bad news is cultural perceptions of ‘old’ people have not kept pace. A 2016 analysis by the World Health Organization found ageism was abundant and many people were completely unaware of their biases toward older people. 

Psychology Today warned, “The especially slippery part about ageism is that we can witness it in action time and again throughout society, often without anything triggering our internal antennae that tells us ‘Hey, something is deeply amiss here.’”

Ageism and elder abuse

One of the ugly things hiding beneath the rock of ageism is elder abuse, including financial exploitation. During 2017, the Department of Health and Human Resources reported: 

Women and the Retirement Crisis

Women and the Retirement Crisis

Here’s a number that will knock your socks off: $400 trillion.1

 By 2050, the retirement savings shortfall in eight of the world’s largest economies is expected to reach $400 trillion, according to estimates from the World Economic Forum (WEF). The shortfall is the difference between the amounts of money retirees may receive from government and/or employer pensions and individual savings. The amount they need to replace 70 percent of their pre-retirement income is also factored in.1

 Retirees in the United States are expected to have the biggest shortfall, coming up at about $137 trillion short.1

 There are many reasons why countries and individuals are poorly prepared to meet the challenges of retirement, including:

Tax Strategies to Save Money on Taxes For 2019

Due to the recent tax law changes there are some tax savings and deferral strategies that you should be aware of for 2019.  As we go into the second half of the year here are some ideas to help you lower and defer taxes:

 1. Participate or Increase Your Employer-Sponsored Plan Contribution

·        In many employer-sponsored retirement plans, your contributions are pre-tax and reduce your taxable income

·        You receive long-term tax benefits since principal and earnings grow tax-deferred until withdrawn

·        You can contribute the maximum to a 401K, 457, or 403B Plan of $19,000 this year.  Those over 50 can contribute an additional $6,000 for a total of $25,000

·        Also, many employers offer a match on your contribution (which is free money to you) so make sure you put in enough to receive the maximum company match

2. Contribute to A Traditional IRA

·        If you don’t have an employer sponsored plan available, consider contributing to a Traditional IRA

·        Depending upon your income, you may be able to deduct contributions in addition to an employer sponsored plan contribution

·        Your IRA also provides long-term tax benefits of tax-deferred growth

·        For 2019, individuals may contribute $6,000 ($7,000 if over age 50)

3. Consider the Timing of When You Retire

·        People often receive a large paycheck upon retirement, if they are offered a buyout or paid for unused sick or vacation days

·        It may be advantageous not to retire at the end of a calendar year and have this additional pay be added to your regular pay for the year

·        Rather should retire at the beginning of the year so you don’t pay unnecessary tax on this additional income.  Plus, you have the added benefit of retiring in the spring and summer months!

4. Consider Itemizing Your Taxes

·        Due to the recent tax change more and more people are taking the standard deduction rather than being able to itemize their taxes.  Especially if you live in a state with high property tax or income tax

·        However, you still may be able to itemize if you have such expenses as high medical bills, extensive charitable contributions and investment losses to name a few

·        Make sure you are checking to see if you should take the standard deduction or itemize your taxes

5. Contribute to an HSA (Health Savings Account)

·        Contributions are tax deductible, grow tax deferred, and come out tax free if used for medical expenses

·        Many of these accounts also allow you to invest the money into stock or bond funds in addition to money market funds.  Make sure that your account offers you these options

·        If you withdraw money after age 65 for non-medical expenses the 20% penalty is waived, and you only pay tax on the distribution

·        The account is yours for your life and you spouse can inherit it

6. Use Capital Loss Rules to Your Advantage

·        No one likes losses, but they are part of investing from time to time. Capital losses may be used to offset capital gains if the securities sold were in a taxable account

·        If capital losses exceed gains during the tax year, you may use up to $3,000 of losses to offset earned income and reduce taxable income

·        Losses above $3,000 can be carried forward to offset gains in future years with no expiration date.

7. Know When to Buy and Sell Mutual Funds

·        Mutual funds declare and pay any capital gains at the end year, usually in November and December

·        You can avoid receiving this gain and having to pay tax on it by selling the fund before the capital gain is declared

·        In some cases, selling before the capital gain is declared may save you a significant amount in taxes

·        Additionally, if you are going are to own mutual funds in a taxable account you should always investigate you how much in taxes, you’ll have to pay each year by owning the fund

8. Position Investments in Different Types of Accounts

·        Consider positioning your more tax-efficient investments in taxable accounts and less tax-efficient investments in tax-deferred accounts

·        Meaning, keep your bonds or bond funds in your retirement accounts and your stocks or stock funds in your taxable account

·        Our current tax system charges higher taxes on interest from bonds and CD’s than it does for stock dividends and long-term capital gains

9. Consider Owning ETFs (Exchange Traded Funds) instead of Mutual Funds

·        Due to their tax structure and management style, ETF’s generally generate less capital gains than mutual funds

·        This could significantly lower the taxes you have to pay buy owning these investments each year which will increase your return over time

o   An investment in Exchange Traded Funds (ETF) or Mutual Funds has the potential of losing money and should be considered as part of an overall program not a complete investment program.

o    Before implementing any of these strategies consider consulting with your tax advisor pertaining to your specific situation. This information is not intended to be a substitute for specific individualized tax advice.

2018 Year End Tax Planning Tips

As we wind out 2018 there is still time to make some changes to your finances that can improve your taxes for this year and possibly years to come.  Here are some things to possibly act on before we ring in the new year…

1)      Should you roll over an old 401K before 2018?  You probably heard by now that a new tax plan was rolled out this year.  It slightly lowered the tax brackets for most and almost doubled the standard deduction for all.  For many of us this this will result in lower taxes this year as compared to last.  However due to the doubling of the standard deduction many of us will not be able to itemize our taxes for 2018 and beyond.  This means that several deductions that were available in 2017 are no longer available;  most notably the ability to deduct charitable contributions.  One way around this is to donate all or part of your required minimum distribution (RMD) (Up to $100,000 per year) directly to a 501(c)(3) charity.  It’s called a Qualified Charitable Distribution (QCD).   RMD is an amount that one must withdraw and pay taxes on from retirement accounts (except for Roth’s) once they reach 70 and ½.  By doing a QCD, this allows the charity to benefit from the donation and you to not pay taxes on the donation.  In order to take advantage of this you must make the donation directly from your IRA custodian to the charity.  Meaning you can’t take receipt of the money first then donate it to the charity.  It’s a relatively easy process, usually just filling out a form from your custodian and they’ll send the check.  The thing to keep in mind is that you can only do this from an IRA, not a 401k.  So, if you’re turning 70 and ½ next year and want to continue donating to charities consider rolling over your old 401K to an IRA before 2019.  If you don’t do this by the end of this year, next year you’ll need to take an RMD from each 401K and the full amount of the RMD will be reported on your 2019 taxes.  Not to mention there are many reasons for someone approaching 70 not to leave an old 401K behind, such as lower fees, better investment options, simplifying things and better estate planning options.  For younger people there are a few reasons to possibly not rollover an old 401K which I’ll cover in another article.   


2)      What should you do about investment losses?  No one likes to lose money in their investments but it’s part of investing.  This year there has been a lot of volatility and many investments are down on the year.  However, when you do have loses you may be able to use them to reduce your tax bill.  First, let’s define what an investment loss is.  It means that an investment is worth less than what you bought it for.  If you have investment loses in a non-retirement brokerage account, then you can capitalize on them by selling the investment.  This now creates a loss and if you wait 30 days before buying the investment back you can write up to $3,000 of the loss off on your taxes.  If the loss is greater than $3,000 then you can carry the loss forward until it is written off in future years ($3,000 per year).  If you have gains in the future, then any loses you’re carrying forward from previous years will offset those gains.  Technically short-term losses are first deducted against short-term gains, then long-term loses are deducted against long-term gains.  Net losses of either type can then be deducted against the other kind of gain.  So, dump those loses before the year ends.  


3)      Should you sell some of your winners?  Another thing this year’s tax change did is keep alive those that pay 0% long-term capital gains taxes.  In 2018 married couples with taxable income up to $77,200 (single filers up to $38,600) pay 0% long-term capital gains taxes.  That means if this year your income is low, and you have some gains (again in non-retirement accounts) you may want to sell some of those to fill out the bracket up to 0% capital gains.  Keep in mind the capital gains get added to your other income to determine your total income for the year.  So first add up your other income to determine how much room there is to realize gains at a 0% rate.  Also, if you expect your income to be higher in future years you might want realize gains at the 15% rate.  The reason being if you have gains and your income is over $250,000 for married couples ($200,000 single filers) there is an additional 3.8% tax on the less of net investment income or excess MAGI (Modified Adjusted Gross Income) over $250,000 for married couples ($200,000 single filers).   


 4)      Do you need additional deductions for this year? There a few options if you need additional deductions.  If you have a 401K through work and haven’t maxed out the contributions, increase your contribution rate so you get in a much as possible before the year ends.  If you or your spouse are self-employed then there is still time this year to set up a Solo 401K and contribute up to the maximum of $18,500 or $24,500 if you’re over 50.  You could also add on a profit share contribution of up to 20% of your income on the business too.  You better act fast though because the deadline is the businesses fiscal year end which is usually Dec 31st.

Another option is to contribute money to an HSA (Health Savings Account) $3,450 for single medical plans and $6,750 for family medical plans.  These are great plans because the money goes in as a tax deduction, grows tax free, and comes out tax free if it’s used for medical expenses.  Some accounts also allow you to invest the money in stock or bonds.  A final option is making a deductible contribution to a Traditional IRA.  Depending on your income and whether you or your spouse are covered by a retirement plan at work determines if you can make this contribution.  The good news is that you have up until April 15th, 2019 (or when you file your taxes) to make this determination.  I’ll also cover this in an additional article.


If you think one of these strategies may make sense the only way to know is estimate your taxes for this year and run some sample scenarios to see what works.  You can also look at last year’s tax returns (if things haven’t really changed this year) to get a good understanding of where your taxes might be this year.  You don’t have much time left for this year so feel free to reach out to us if you need more help.  Happy Tax Planning!        

To Retire With Confidence, Have A Plan

If you want to retire with confidence, have a plan. 

“As you near retirement age or even within a decade or so, it is time to start doing some serious financial planning,” said Larry Stein, CFA, author of Peace of Mind Investing.

“Retiring with confidence is to develop a plan that makes sense, executing it, and reviewing it at least every five years to make sure you’re on track.”

Stein addresses a number of risks we need to consider – those we know and don’t know. This includes increased longevity, inflation, family responsibilities (such as caring for parents), healthcare, and interest rates. All could have a major affect on finances and lifestyles.

Stein says a couple with both spouses at age 65 today has a 50 percent chance one of them will live past 92, and a 25 percent chance one will live to 97, in which challenges can arise. Unless you have serious health risks or unfortunate heredity, basing your financial planning on a 95-year lifespan makes sense.

Peace of Mind Investing is built on a single premise that’s been time-tested through the Great Depression, two World Wars, and multiple other major events – yet is incredibly simple. The grand premise: stock prices rise over time. Stein’s book boils down to the following key points:

  • First

    • Set return goals that make sense for your personal situation. The only benchmark that would make sense is to achieve your personal goals over a time horizon that fits your specific situation. Your performance goals should be the rate of return you need to live comfortably through retirement. The true measure of investment performance is your return through a full market cycle, up and down. “Beating the S&P 500 or any other such nonsense is pure noise and distraction,” says Stein. 

  • Second

    • Manage risk through asset allocation and rebalancing.

  • Third

    • Trim risk during euphoria and overvaluation; buy during times of fear and undervaluation.

Stein says retirees and pre-retirees must manage risk vigilantly. Withdrawals from a portfolio that sustains significant declines can accelerate the loss in value. Risk management is imperative.

Being Financially Savvy is A Family Business

Like it or not, we’re all involved in running the “family business.”

We worry that our parents might outlive their retirement savings. We’re comforted by the thought that family members would probably bail us out if we got into money trouble. We strive to help our children financially, and we’d like to bequeath them at least part of our nest egg.

In short, our family is our asset, liability, and legacy.

Now here’s the contention: It’s time to build this notion into the way we manage our money.

 Here are just some of the reasons why:

Raising Children

If your children grow up to be financial deadbeats, you may likely rise to the rescue. Indeed, your children could turn out to be your greatest financial liability.

Don’t want your adult children swimming in credit card debt, missing mortgage payments, and constantly asking you for money? Your best bet is to make sure problems never arise by raising money-savvy children.

That’s trickier than it seems. Children grow up spending their parent’s money, so it’s almost inevitable that they will have a skewed financial outlook. After all, for children, all purchases are free, so why should they fret about the price tag or control their desires?

Make your children feel like they’re spending their own money. Give them a candy allowance when they are younger and a clothing allowance when they are teenagers, and insist they live within this budget. This way, instead of you constantly saying “no” to your children, they will learn to say “no” to themselves.

Launching Adult

Once your children get into the work force, you want them to get into the “virtuous financial cycle” where they are steadily building wealth. 

They will become able to own their home rather than renting, buy their cars rather than leasing, fully fund their 401(k) plan and their individual retirement accounts each year, and never carry a credit card balance.

The sooner your 20-something children get into this virtuous cycle, the easier it will be for them to meet their goals and less of a financial drain on you. To that end, encourage your children with your words and with your fine example.

A few financial incentives may also help. Tell your adult children if they scrounge together a house payment, you will lock in some additional dollars, or offer to subsidize their 401k contribution at 50 cents on the dollar.

This doesn’t mean you intend to fund their retirement instead of your own, but getting them started as investors sure seems like a smart idea.