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Season two of 2020?
  • January 12, 2021/
  • Posted By : admin/
  • 0 comments /
  • Under : Investing 101
 

Does it feel like 2021 yet?

The twists and turns so far make it seem like 2020 is dragging into a second season.

As Americans, we’re shocked and worried, and we’re wondering how political disagreements turned into excuses for violence.

As a financial professionals, we know that the politics, protests, and rioting in DC are just one factor affecting markets.

We honestly don’t know what will happen over the next few weeks, but we can help you understand how it affects you as an investor.

Why did markets surge the day the Capitol was attacked?

While the world watched the violence in DC with horror, markets quietly rallied to new records the same day.1

That’s weird, right?

Well, not really.

We think it boils down to a few things.

  1. Computers and algorithms are dispassionate, executing trades regardless of the larger world.
  2. Markets don’t always react to short-term ugliness. Instead, they reflect expectations about economic and business growth plus a healthy dose of investor psychology.
  3. With elections officially at an end, political uncertainty has dissipated.

Overall, we think investors are looking past the immediate future and hoping that vaccines, increased economic stimulus, and economic growth paint a positive picture of the future.

The Democrats control the White House and Congress. What does that mean for investors?

If you’re like a lot of people, you might think that your party in power is good for markets and your party out of power is bad.

That makes for a stressful experience every four years, right?

Fortunately, that’s not the case at all. Markets are pretty rational with respect to politics and policy.

While businesses and investors generally dislike increased taxes and corporate regulation, the Democrats hold such slim majorities in the House and Senate that it limits their ability to pass many big policy changes.

Also, the Democrats’ immediate agenda is very likely to be focused on fighting the pandemic and passing more stimulus aid, both of which should support stock prices.

Does that mean markets will continue to rally?

No guarantees, unfortunately. With all the frothy market activity and rosy expectations about the future, bad news could knock stocks down a peg or two.

A correction is definitely possible, and some strategists think certain sectors are in a bubble.

Bottom line, expect more volatility.

Well, what comes next?

We wish we could tell you.

We’re hoping that the vicious, divisive politics will come to an end after the inauguration, and the politicians can get back to work getting us through the pandemic.

We’re optimistic that the light at the end of the tunnel is getting closer and we can start going back to normal.

We’re proud of what scientists and medical professionals have been able to accomplish in such a short amount of time.

We’re grateful for the folks around us.

We’e hopeful about the future.

How about you?

What’s your take? We’re interested to hear your thoughts.

Warmly,
The NorthStar Team

 

P.S. Tax laws are likely to change under the Biden presidency. We don’t know exactly when they’ll happen or what they’ll look like, but we’ll be in touch when we know more.

1https://www.cnbc.com/2021/01/07/stocks-rally-to-record-highs-traders-on-whats-next-for-markets.html


Investing Lessons from an Exceptionally Instructive Year
  • January 4, 2021/
  • Posted By : admin/
  • 0 comments /
  • Under : Investing 101
Once in a very great while, there comes a year in the economy and the markets that may serve as a tutorial — in effect, a master class in the principles of successful long-term, goal-focused investing. Two thousand twenty was just such a year.

On December 31, 2019, the Standard & Poor’s 500 Stock index closed at 3,230.78. This past New Year’s Eve, it closed at 3,756.07, some 16.3% higher. With reinvested dividends, the total return of the S&P 500 was about 18.4%.

From these bare facts, you might infer that the equity market had, in 2020, quite a good year. As indeed it did. What should be so phenomenally instructive to the long-term investor is how it got there.

From a new all-time high on February 19th, the market reacted to the onset of the greatest public health crisis in a century by going down roughly a third in five weeks. The Federal Reserve and Congress responded with massive intervention, the economy learned to work around the lockdowns — and the result was that the S&P 500 regained its February high by mid-August.

The lifetime lesson here: At their most dramatic turning points, the economy can’t be forecast, and the market cannot be timed. Instead, having a long-term plan and sticking to it — acting as opposed to reacting, which is our clients’ and our firm’s investment policy in a nutshell — once again demonstrated its enduring value.

(Two corollary lessons are worth noting in this regard. (1) The velocity and trajectory of the equity market recovery essentially mirrored the violence of the February/March decline. (2) The market went into new high ground in midsummer, even as the pandemic and its economic devastations were still raging. Both outcomes were consistent with historical norms. “Waiting for the pullback” once a market recovery gets under way, and/or waiting for the economic picture to clear before investing, turned out to be formulas for significant underperformance, as is most often the case.)

The American economy — and its leading companies — continued to demonstrate its fundamental resilience through the balance of the year, such that all three major stock indexes made multiple new highs. Even cash dividends appear on track to exceed those paid in 2019, which was the previous record year.

Meanwhile, at least two vaccines were developed and approved in record time, and were going into distribution as the year ended. There seems to be good hope that the most vulnerable segments of the population could get the vaccines by spring, and that everyone who wants to be vaccinated can do so by the end of the year, if not sooner.

The second great lifetime lesson of this hugely educational year had to do with the presidential election cycle. To say that it was the most hyper-partisan in living memory wouldn’t adequately express it: adherents to both candidates were genuinely convinced that the other would, if elected/reelected, precipitate the end of American democracy.

In the event, everyone who exited the market in anticipation of the election got thoroughly (and almost immediately) skunked. The enduring historical lesson: never get your politics mixed up with your investment policy.

Still, as we look ahead to 2021, there remains far more than enough uncertainty to go around. Is it possible that the economic recovery — and that of corporate earnings — have been largely discounted in soaring stock prices, particularly those of the largest growth companies? If so, might the coming year be a lackluster or even a somewhat declining year for the equity market, even as earnings surge?

Yes, of course it’s possible. Now, how do you and we — as long-term, goal-focused investors — make investment policy out of that possibility? Our answer: we don’t, because one can’t. Our strategy, as 2021 dawns, is entirely driven by the same steadfast principles as it was a year ago — and will be a year from now.

We have been assured by the Federal Reserve that it is prepared to hold interest rates near current levels until such time as the economy is functioning at something close to full capacity — perhaps as long as two or three more years.

For investors like us, this makes it difficult to see how we can pursue our long-term goals with fixed income investments. Equities, with their potential for long-term growth of capital — and especially their long-term growth of dividends — seem to us the more rational approach. We therefore tune out “volatility.” We act; we do not react. This was the most effective approach to the vicissitudes of 2020. We believe it always will be.

As always, we’re here to talk any and all of these issues through with you.

We wish you a happy, healthy, prosperous and fulfilling 2021.


Lessons from 2020 to make 2021 stronger (3-minute video)
  • December 30, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Live Well , Personal Finance
We’ve made it through a hard, tumultuous year. And we’re still dealing with a pandemic and an uncertain economy.

While we may not feel the usual sense of a “fresh start” this New Year, we can use the transition as an opportunity to consider some valuable lessons that can help us navigate the next set of challenges.

We made a short video reflecting on three lessons we learned in 2020 that we think can make us stronger in 2021.

You can watch it here.

 

Transcription:

Hello, I’m Dr. Chris Mullis with NorthStar Capital Advisors. 2020 was a challenging year for me. Was it challenging for you as well?

Every December, I like to take time to reflect on the past year and think about what I learned. I think that’s more important than ever this year, and I wanted to share my thoughts with you. I hope they’re useful to you as you take stock of 2020 and plan for the new year.

Though 2020 was immensely challenging for me personally and professionally, the difficulties held valuable lessons for me. Here are three lessons I’m planning to keep in mind as we head into the new year.

Lesson #1: Expect the unexpected.

I know, it’s easier said than done, but it’s so true. I can’t count the number of plans I had to change, reschedule, or even cancel this year. You know one of the things that I missed the most is the joy of seeing my children’s musical performances.

In my work, I’ve learned to help clients build contingencies and backup plans. Now, I’ve incorporated that into my personal life so that I can switch gears whenever circumstances change. And the more I “go with the flow,” the more creative I’m becoming at finding solutions when new roadblocks pop up.

Lesson #2: Appreciate what you have.

We’ve all experienced losses this year, and some of those losses were profound. And yet we’re still here. That, in itself, is a gift. In 2021, I’m going to take more time to recognize the blessings in my life, especially when I’m feeling anxious or under stress. Personally, I’m grateful for my family, good health, and good neighbors. And I’m especially thankful for folks like you.

Lesson #3: Ask for help.

We’re none of us an island, especially during challenging times. Asking for help and support from the people around you is a sign of strength and courage. During this past year I’ve leaned on the strength and wisdom of fellow advisors to adapt, improve and grow professionally. And I’m going to keep doing that.

In 2021, I hope we can both recognize when we’re not at our best and reach out for support when we need it. Now I’d like to hear from you. What did you learn from 2020, and what are you taking with you into 2021?

Will you please drop me a note to let me know?

As a financial planner, I’m used to being someone in the know, but I also learn so much from my clients and my friends.  Can you teach me a lesson from your own experiences this year?

Are you still feeling shell-shocked by 2020 or thinking about financial goals for the new year? Just me drop a note to let me know. I’ll reach out.

Thank you for being on this incredible journey with me. I’m so honored by your trust and I look forward to learning many new lessons together in the year to come.


Stimulus bill (what’s inside)
  • December 22, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Economy , Personal Finance

Here’s a quick note about the new economic relief package that Congress passed just yesterday. The Consolidated Appropriations Act, 2021 comes in at over 5,000 pages and the NorthStar Team has been totally nerding out on it!

What’s in the box?
The rescue package includes:1

  • $600 direct payments to adults and dependent children
  • An extra $300/week in unemployment benefits through at least mid-March 2021
  • $325 billion in small business aid
  • Vaccine distribution funding
  • Food assistance for low-income households
  • Emergency rental relief

Who is eligible for the stimulus payments?
It appears that lawmakers are following slightly different income limits than they used for the CARES Act. Individuals who earned less than $75,000 in 2019, heads of household earning less than $112,500, and couples earning less than $150,000 are eligible for the full $600/person payment. The payment starts phasing out after $75,000 and disappears entirely for individuals earning more than $87,000 (or couples earning over $174,000).2

While dependent children under 17 will also receive $600 each, it doesn’t appear that adult dependents like college students or elders qualify for the payments.

If your family added dependents in 2020 or you earned too much in 2019 to qualify (but would qualify in 2020), you may not receive full payments immediately but can request additional money once you file your 2020 taxes. If you qualified based on your 2019 income but your 2020 income would have reduced your payment, you won’t have to pay it back; nor will it count as taxable income.

How do I claim a stimulus payment?
Like the CARES Act payments earlier this year, the stimulus payment should end up in your bank account or arrive in the mail. If you’ve moved or changed bank accounts since you filed your taxes, you can update your address with the IRS here. It appears that you can’t update direct deposit information due to fraud risks.

While the IRS hasn’t released a timeline for sending out payments, it’s possible electronic payments could start before the end of the year. When the last round of stimulus passed, the IRS began distributing payments two weeks later; however, plenty of eligible folks still haven’t received them many months later.3

What else do I need to know?

Small business relief: Congress included another round of relief for small business owners by extending the Paycheck Protection Program with another $284 billion in forgivable loans. Some of the funds will be set aside for very small businesses, and the PPP is now available to nonprofits and local media outlets.4

An extra $20 billion has also been appropriated for Economic Injury Disaster Loans for businesses in low-income communities, and $15 billion more is earmarked for live venues, movie theaters, and cultural institutions that have been financially damaged by the pandemic.

The deal also clarifies that PPP borrowers will be able to deduct expenses paid for with forgiven loans, clearing up a potentially nasty tax issue.

Unemployment benefits: The package also extends unemployment benefits of $300/week for another 11 weeks, beginning as early as December 27 and lasting at least until March 14, 2021. A benefits program specifically for contract and gig workers that was slated to expire at the end of the year is also extended through March.

What should I do with my payment?
If you’re one of the millions of Americans struggling to stay afloat right now, please use the stimulus payment to pay for your three basics: food, shelter, and medicine. If you’re in a better place, we’d recommend paying down any high-interest debt you’ve accumulated or beefing up your emergency savings.

If you’re among the very fortunate who don’t need to shore up your finances, we’d recommend putting it toward your retirement savings, other financial goals, or investing it in yourself through a course or hobby.  Or even better, donate it to your favorite charity.

That’s it for now. We hope you and your loved ones are safe, warm, and well.

Questions? We’re here. Reach out at (704) 350-5028.

Happy Holidays and Warmest Wishes!
The NorthStar Team

 

P.S. Wherever there’s money, there are scammers after it. Please be on alert for “official-looking” emails asking you to open an attachment or click a link—they may contain malware. If you get a suspicious email, check the sender’s name and email address to make sure they’re not fake. When in doubt, delete the email. The IRS or Treasury department will not require you to follow emailed instructions to receive a stimulus check.

P.P.S. Some great news to share: 556,208 folks were vaccinated against COVID-19 in the first week! That’s the power of human ingenuity and collective effort. We’re so grateful to be seeing some light at the end of this dark tunnel!5

1https://www.washingtonpost.com/business/2020/12/20/stimulus-package-details/

https://www.wsj.com/articles/what-is-in-the-900-billion-covid-19-aid-bill-11608557531

2https://www.wsj.com/articles/stimulus-checks-round-2-when-will-they-arrive-how-much-will-they-be-11608561726

3https://www.wcvb.com/article/when-will-you-get-a-second-stimulus-check/35025504

4https://www.cbsnews.com/news/stimulus-check-600-dollars-eligibility-2020-12-21/

5https://www.bloomberg.com/news/articles/2020-12-20/u-s-has-administered-556-208-vaccine-shots-in-first-week

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


Our Warmest Wishes!
  • December 15, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Live Well , Personal Finance
As this crazy, eventful year comes to a close, we’d like to offer a heartfelt “thank you” for being part of the NorthStar Capital Advisors universe.

We are so deeply grateful for you allowing us to be part of your journey to a stronger financial future and we’re sending you our warmest wishes.

2020 was a year of immense uncertainty, global shocks, and worry. It was also a year where the indomitable human spirit shined.

We don’t yet know what 2021 will bring for us, the markets, or the economy. We have a new president who might bring big changes (including increasing taxes on some folks). New vaccines and treatments will help whittle away the pandemic’s threat. Life will go on.

There’s a lot we can’t control about the future, but we can control a few things.

As we usher in a new year with great expectations, can we commit to a few things together?

Harnessing Our Dreams Amid Uncertainty
A lot of dreams were deferred this year. But let’s move forward and recommit to them even if they look a little different in our new world. Our job together is to help you grow and protect your wealth so you can use it to reach your aspirations, retire in comfort, create change in the world, and leave a legacy of love.

Building Up Ourselves (And Our Behaviors)
With so much out of our control (the markets, the economy, pandemics, and other shocks), it’s so important to focus on ourselves, our hopes, our goals, and our dreams. Identifying the choices in our control isn’t just a good financial lesson, it’s a great life lesson. There’s a quote we like from the Stoic philosopher Epictetus, who said:

“The chief task in life is simply this: to identify and separate matters so that I can say clearly to myself which are externals not under my control, and which have to do with the choices I actually control.”

Increasing Our Kindness And Patience
In a time of political polarization and increasing social chasms, let’s commit to treating each other with kindness, patience, love, and respect. We’re not sure who originated this quote, but we try to keep it in mind when we talk to folks we disagree with:

“Be kind, for everyone you meet is fighting a hard battle.”

Focusing on Time in the Market, Not Timing the Market
Timing the market is impossible to do consistently and well. Even for the pros who spend their lives watching six monitors at a time. The best day to invest in the market is the day after you get paid. The most potent factor you have as an investor is time. Markets are unpredictable, and those who jump in and out based on emotion or “gut feelings” about tops and bottoms typically do worst of all.

What else should we commit to together?

In closing, please accept our gratitude, our good wishes, and our thoughts for the year ahead. May you and yours enjoy warmth, love, and success in 2021.

Warmest Wishes,
The NorthStar Team


Temperament over Intellect
  • December 8, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Seeking Prudent Advice

Warren Buffett once said, “The most important quality for an investor is temperament not intellect.”

Investors very often buy at high prices when the market is hot and attractive, and sell at low prices after observing periods of poor performance.

This leads average investors to severely trail both the S&P 500 index and the Barclays Aggregate Bond Index over long time periods.  This is why investors are very often their own worst enemy.

CBS MoneyWatch author Larry Swedroe recommends in this article that you ask yourself if you believe that you’re best served by being your own advisor:

  • Do I have the temperament and the emotional discipline needed to adhere to a plan in the face of the many crises I will almost certainly face?
  • Am I confident that I have the fortitude to withstand a severe drop in the value of my portfolio without panicking?
  • Will I be able to re-balance back to my target allocations (keeping my head while most others are losing theirs), buying more stocks when the light at the end of the tunnel seems to be a truck coming the other way?

 


20 Gifts That Last a Lifetime
  • December 1, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices , Personal Finance

Let’s face it. Buying meaningful gifts for our family and friends is really, really hard.

If you want to give something that has a larger impact long after the holiday season has passed, why not give the gift of financial education and wisdom for living a fulfilled life?

Given the academic background of our firm (“PhDs with passion”), I know the following is going to be a big shocker.

We love reading books and we love giving books as gifts!

Below you’ll find our revised & expanded 2020 NorthStar Guide to Gifts That Pay Off. It’s full of our favorite book and money-related gift recommendations for those ages 4 to 94!

So what’s the most valuable holiday gift of 2020? A fun lesson in financial literacy and living your best life!

Happy shopping!


2020 NORTHSTAR GUIDE TO GIFTS THAT PAY OFF


Ages 4 to 10

Money Ninja: A Children’s Book About Saving, Investing, and Donating
Young readers learn how money can work for them instead of spending it.
https://www.amazon.com/Money-Ninja-Childrens-Investing-Donating/dp/1953399592

Money Savvy Pig
The piggy bank for the 21st century!
http://www.moneysavvy.com/assembled/money_savvy_pig.html


Ages 8-12

Finance 101 for Kids: Money Lessons Children Cannot Afford to Miss
Informative and entertaining book to help children get on the right path to making smart personal financial decisions.
https://www.amazon.com/Finance-101-Kids-Lessons-Children/dp/1634139437/ref=pd_bxgy_img_2/147-5920064-0475525


Ages 11-16

Cash Cache
The award-winning personal finance organizer for teens!
http://www.moneysavvy.com/assembled/cash_cache.html


Ages 13-18

O.M.G. Official Money Guide for Teenagers
How to turn pocket money into power and freedom
http://www.moneysavvy.com/assembled/omgt.html

What Color Is Your Parachute for Teens
Career guide for teens to help zero in on their favorite skills and find their perfect major or career
https://www.parachute4teens.com/


High School Graduates (plus Recent Retirees and New Entrepreneurs)

5 Book
Where will you be five years from today?
https://www.live-inspired.com/catalog/product/books-by-kobi-yamada/5-where-will-you-be-five-years-from-today/


College Students

O.M.G. Official Money Guide for College Students
Don’t send your student off to college without first tucking this essential reading into their book bag!
http://www.moneysavvy.com/assembled/omgc.html

They Don’t Teach Corporate in College
A twenty-something’s guide to the business world
https://www.barnesandnoble.com/w/they-dont-teach-corporate-in-college-alexandra-levit/1130470904


College Graduates

Generation Earn
Young professional’s guide to spending, investing, and giving back
http://www.kimberly-palmer.com/


Newlyweds

Jumpstart Your Marriage & Your Money
Guide to help couples stop worrying about money and start building wealth together.
https://www.amazon.com/Jumpstart-Your-Marriage-Money-Building/dp/0998805157


Parents with Young Children

Raising Financially Fit Kids
Help prepare your children for a lifetime of smart money decisions
https://www.amazon.com/Raising-Financially-Fit-Kids-Revised/dp/1607744082

The Opposite of Spoiled
Raising kids who are grounded, generous, and smart about money
https://ronlieber.com/books/the-opposite-of-spoiled/


Adults

Happy Money
Are you getting the biggest happiness bang for your buck?
https://www.amazon.com/Happy-Money-Science-Happier-Spending/dp/1451665075

The One-Page Financial Plan
A simple way to be smart about your money
https://www.amazon.com/One-Page-Financial-Plan-Simple-Smart/dp/1591847559


50+ Adults

Life Reimagined
The science, art, and opportunity of midlife
http://www.barbarabradleyhagerty.com/life-reimagined

The Charles Schwab Guide to Finances After Fifty
Answers to your most important money questions
https://content.schwab.com/web/retail/public/book/

I’ve Decided to Live 120 Years: The Ancient Secret to Longevity, Vitality, and Life Transformation
Ignite the true spirit of what it means to live fully
https://www.amazon.com/Ive-Decided-Live-Years-Transformation/dp/1935127993


Caregivers

Being Mortal
Medicine and what matters in the end
http://atulgawande.com/book/being-mortal/

On Living
An uplifting meditation on how important it is to make peace and meaning of our lives while we still have them
https://www.amazon.com/Living-Kerry-Egan/dp/1594634823


At Thanksgiving and always…
  • November 25, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Live Well

It’s a season for giving thanks. And we wanted to thank you, our dear clients and friends, for allowing us to do what we love every day.

We’re thankful for the opportunity to work toward a mission that we truly believe in — helping families and communities articulate, underwrite, and fully embrace their great lives.

Please know that at Thanksgiving and always, we’re grateful for you.

May the good things in life be yours in abundance throughout the holiday season.

Happy Thanksgiving!
The NorthStar Team


Kintsugi: How adversity can unlock growth.
  • November 17, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Live Well
This year has been difficult for many of us, often in ways we could never have anticipated.

Some of us might even feel shattered.

But often, when we put ourselves back together, we’re stronger for it.

We made a short video showing how you can reflect on this year and discover how you’ve grown (or are still growing) as you put the pieces of 2020 together and consider your next steps.

You can watch it here.

Click to watch it here.

 

Transcription:

Hello, I’m Dr. Chris Mullis with NorthStar Capital Advisors and I’m here to help put this year’s adversity into perspective and learn from it.

Recently I’ve been thinking about a Japanese art called Kintsugi. Have you heard of it? When a piece of pottery becomes broken, the artist puts the pieces back together using gold lacquer. This results in a unique work of art that’s far more striking than the original, unbroken version. At its core is the philosophy that scars and imperfections shouldn’t be hidden, they should be embraced and highlighted to create something more beautiful than before.

I think we can learn a lot from that philosophy. Especially this year.

I don’t know your circumstances as you watch this video. Maybe the life you thought you were living is in pieces around you. Maybe you’re just getting by. Maybe this year was your time to shine.
Wherever you are, I’d like you to take a few minutes to reflect on the lessons you can take from your experiences this year.
 
Why? Because hard times can teach us so much about ourselves if we take time to stop and think.

Here are five questions I’d like you to consider.

Question #1 — What “fell apart” for me this year? 

While for some of us it may be tempting to just say “everything,” really take a moment to list the plans that were canceled, opportunities that were lost, relationships that changed, and so on.

Question #2 — How did I adapt to the things outside my control? 

Maybe you planned a zoom wedding. Maybe you stopped working to stay home with kids or elderly parents. Maybe you re-examined your spending or decluttered your house. Or maybe you broke down. All answers are OK.

Question #3 — What did I learn that surprised me? 

Did you discover a new passion for cooking? Did you learn new things about your friends and family? Did you discover that you actually miss spending time in the office? Any surprise, good or bad, can make the list.

Question #4 — How have I grown from these experiences?

Maybe you’ve questioned some long-held beliefs or shifted your priorities. Or perhaps you found strength you didn’t know you had. Reflect on the many ways you’ve become more resilient this year.

Finally, Question #5 — What am I grateful for?

Gratitude and thankfulness are so important. Especially during the tough times. Research consistently shows that people who actively notice and express the things that make them grateful are much happier. So give it a shot. No matter how big or small, list the things you’re grateful for.

I’ll start. I’m so grateful for my family and particularly my wife Rita. I couldn’t have gotten through this year without them. I’m also grateful for my clients and my friends. And I’m grateful for you, taking the time to watch this video.

When a cup shatters on the floor, we can’t put it back together exactly as it was before. But we can accept and embrace its history — and make something better and stronger with the broken pieces.
Whether you’ve felt more like the shattered cup or the shining gold lacquer this year, consider the ways you’ve grown from the experience and how you’ll use them to become stronger.

You may be in the middle of a growing pain right now.  If there is anything I can do to help you make sense of your current situation or make a new plan for moving forward, please reach out anytime. I’m here to give you a hand if you need one.

Thank you and be well.


What Issues Should You Consider Before the End of the Year?
  • November 11, 2020/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices , Financial Planning , Personal Finance , Saving Money

The end of the year provides a number of financial planning opportunities and issues. These include tax planning issues, issues surrounding investment and retirement accounts, charitable giving, cash flow & savings, and insurance & estate planning issues.

We use the checklist below to proactively scan for many actionables to help serve our clients. In this checklist, we cover a number of planning issues that you need to consider prior to year-end to ensure you stay on track, including:

  • Various issues surrounding your investment and retirement accounts including matching capital gains against any investment losses in taxable investment accounts and ensuring that all Required Minimum Distributions (RMDs) are taken.
  • Tax planning issues including moves dependent upon your prospects for higher or lower income in the future. You will also want to review where you sit relative to your tax bracket as this is a good time to make moves to fill out your tax bracket for the current year that also might prove beneficial down the road.
  • For those who are charitably inclined there are several strategies that will also help reduce your tax liability that can be considered based upon your situation.
  • For those who own a business, tax reform has created some opportunities surrounding pass-through income from your business to your personal return. Accelerating or deferring business expenses presents another solid planning opportunity.
  • It’s wise to review your cash flow situation as you near year-end to see if you can fund a 529 plan for children or grandchildren or to see if you can save more in an HSA or employer-sponsored retirement plan like a 401(k).

This is a comprehensive checklist of the types of year-end planning issues that you should be discussing with your financial advisor to ensure you maximize cash flow and tax opportunities in the current year and beyond.

Issues You Should Consider Before the End of Year
ASSET & DEBT ISSUES

Do you have unrealized investment losses?
If so, consider realizing losses to offset any gains and/or write off $3,000 against ordinary income.

Do you have investments in taxable accounts that are subject to end-of-year capital gain distributions?
If so, consider strategies to minimize tax liability.

Did you reach your Required Beginning Date, or are you taking an RMD from an inherited IRA?
If so, under the CARES Act, RMDs are waived for 2020.

TAX PLANNING ISSUES

Do you expect your income to increase in the future?
If so, consider the following strategies to minimize your future tax liability:
– Make Roth IRA and Roth 401(k) contributions and Roth IRA conversions.
– If offered by your employer plan, consider after-tax 401k contributions.
– If over age 59.5, consider accelerating IRA withdrawals to fill up lower tax brackets.

Do you expect your income to decrease in the future?
If so, consider strategies to minimize your tax liability now, such as Traditional IRA and 401(k) contributions instead of contributions to Roth accounts.

Do you have any losses for this year or carryforwards from prior years?
If so, consider the following:
– There may be tax-loss harvesting opportunities.
– You may be able to take the loss or use the carryforward to reduce taxable income by up to $3,000.

Are you on the threshold of a tax bracket?
If so, consider strategies to defer income or accelerate deductions and strategies to manage capital gains and losses to keep you in the lower bracket. Consider the following important tax thresholds:
– If taxable income is below $163,300 ($326,600 if Married Filing Jointly [MFJ]), you are in the 24% percent marginal tax bracket. Taxable income above this bracket will be taxed at 32%.
– If taxable income is above $441,450 ($496,600 if MFJ), any capital gains will be taxed at the higher 20% rate.
– If your modified adjusted gross income (MAGI) is over $200,000 ($250,000 if MFJ), you may be subject to the 3.8% Medicare surtax on the lesser of net investment income or the excess of MAGI over $200,000 ($250,000 if MFJ).
– If you are on Medicare, consider the impact of Medicare’s Income-Related Monthly Adjusted Amount (IRMAA) surcharges.

Are you charitably inclined and want to reduce taxes?
If so, consider the following:
– For 2020, the CARES Act created a $300 above-the-line deduction for contributions to certain qualifying charities. This can help reduce AGI for taxpayers claiming the standard deduction.
– If you expect to take the standard deduction ($12,400 if single, $24,800 if MFJ), consider bunching your charitable contributions (or contributing to a donor-advised fund) every few years which may allow itemization in specific years.

Will you be receiving any significant windfalls that could impact your tax liability (inheritance, Restricted Stock Units vesting, stock options, bonus)?
If so, review your tax withholdings to determine if estimated-payments may be required.

Do you own a business?
If so, consider the following:
– If you own a pass-through business, consider the Qualified Business Income Deduction eligibility rules.
– Consider the use of a Roth vs. Traditional Retirement plan and its potential impact on taxable income and Qualified Business Income.
– If you have business expenses, consider if it makes sense to defer or accelerate the costs to reduce overall tax liability.
– Some retirement plans, such as a Solo 401(k), must be opened before year-end.

Have there been any changes to your marital status?
If so, consider how your tax liability may be impacted based on your marital status as of December 31st.

CASH FLOW ISSUES

Are you able to save more?
If so, consider the following:
– If you have an HSA, you may be able to save $3,550 ($7,100 for a family) and an additional $1,000 If you are over the age of 55.
– If you have an employer retirement plan, such as a 401(k), you may be able to save more but must consult with the plan provider as the rules vary as to when you can make changes.
– For 2020 the maximum salary deferral contribution is $19,500, plus the catch-up contribution if over the age of 50 of $6,500 per year.

Do you have a 529 plan? If so, consider the following:
– You can contribute up to $15,000 ($30,000 if a joint gift is made) each year without filing a gift tax return.
– Alternatively, you can elect the Five Year Accelerated Gift of $75,000.

INSURANCE PLANNING ISSUES

Will you have a balance in your FSA before the end of the year?
If so, consider the following options your employer may offer:
– Some companies allow you to roll up to $550 in your FSA account over the previous year.
– Some companies offer a grace period up until March 15th to spend the unused FSA funds.
– Many companies offer you 90 days to submit receipts from the previous year.
– If you have a Dependent Care FSA, check the deadlines for unused funds as well.

Did you meet your health insurance plan’s annual deductible?
If so, consider incurring any additional medical expenses before the end of the year at which point your annual deductible will reset.

ESTATE PLANNING ISSUES

Have there been any changes to your family, heirs, or have you bought/sold any assets this year?
If so, consider reviewing your estate plan.

Are there any gifts that still need to be made this year?
If so, you can make gifts up to $15,000 ($30,000 if a joint gift is made) per year to an individual without filing a gift tax return.

OTHER ISSUES

Do you have children in high school or younger who plan to attend college?
If so, consider financial aid planning strategies, such as reducing income in specific years to increase financial aid packages.


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