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Recent Posts

How Delays May Affect Your Tax Filing in 2021
Planning for Upcoming Tax Increases
Is Robin Hood Right for You?
Sales Incentives: Who Really Pays?
Could an IRA Trust Work for Your Plan?


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Is Robin Hood Right for You?

A popular approach to investing is offered through the Robin Hood app. This service allows an investor to participate in the market without requiring any minimum investment and without charging any commission on the trades by an investor. Available investment choices include stock, ETFs, options, a number of ADRs, and even cryptocurrency. A margin account is also available, subject to meeting the regulatory requirement of a $2,000 minimum. The Robin Hood service is offered as a web platform or as a mobile app trading platform.

Burden of the Net Investment Income Tax

Speaking of fears of investing, investors may encounter the burden of the 3.8% net investment income tax in addition to many other potential taxes on income. Though the percentage may not seem very high when we consider the top regular income tax brackets, it is important to remember that it is a separate tax stacked on top of federal income tax, state and local income tax (where applicable), not to mention consideration of the other additional costs of investing such as advisory and other professional fees.

Overcoming Fears of Investing

Educating clients on some of the basics of financial planning and investing can be both frustrating and rewarding. Many folks want to learn about these things and understand the importance of knowledge in building their financial future and protecting against mistakes and the markets. Of course, one of the first lessons they should learn is that an investor can only do so much to protect against the vicissitudes of the markets. Keeping the natural instincts of fear and greed under control can do much here, but is not always enough.

Simplify Your Financial Life

All too often, we see clients with a potpourri of investments, accounts funded from various sources, opened at different times and using different advisers. There is no overall plan or strategy and the client usually doesn’t exactly know what they have. This is a clarion call for the client to organize and simplify their finances.
What can one do? Merge similar accounts such as IRAs, CDs and brokerage accounts. Exit, combine or exchange products such as annuities and insurance. These actions not only make it easier for you as owner to keep up with what you have but it will save a great deal of effort and aggravation for your personal representatives when you either become disabled or die.

What Clients Really Want

A recurring theme in the financial industry media is pundits offering assertive statements (opinions) about what clients really want. It should be obvious by now that clients differ in what they want and it is not just as simple as getting the best investment advice. Recently, speaking with an experienced adviser, I heard first-hand what one client said during the course of a conversation with the adviser about the client’s investments in the context of whether to rebalance to the desired allocation.

Financial Transactions Tax Proposal

Recently, the subject of a financial transactions tax came to the forefront of Congressional proposals for new legislation. The tax – denominated a “miniscule” 0.01% – is touted as a way to raise hundreds of billions of dollars in new taxes for the government to spend on various pet projects. Experience tells us that the applicable rate will not remain at the proposed initial low rate of one basis point and will no doubt gradually increase over time.
Additional factors argued to support the proposed tax include the desire of Congress to rein in high frequency trading and similar transactions by large investors and a claim that “fairness” would require such a tax since there is no sales tax currently imposed on financial transactions.

401(k) Plans: Stay or Go?

A decision facing many 401(k) participants as they near retirement is whether to leave their deferred contributions in the employer plan or rollover to their own IRA. With all the attention given the various fiduciary rules, this issue has become even more important. Not surprisingly, there are good arguments supporting a decision going either way as well as counter-arguments against each approach.
Some employer plans encourage retired or departed employees to take their money with them and for the smallest accounts will insist.

Considering Donor Advised Funds

Currently a very popular charitable giving technique, the donor advised fund makes it easy to fulfill donative intent without a great deal of effort. With the very low contribution thresholds some of the funds allow (Schwab, Fidelity and Vanguard for example), donor advised funds are available to practically any investor for a small initial investment. That investment could be in cash, mutual funds/ETFs, stock and other types of investments. What’s more, the funds offer a wide variety of choices of charitable recipients as well as in the investment allocation of the funds.

Fun with Capital Gains

One thing most investors have in common is dealing with capital gains and losses in their investment accounts. The capital gains tax can be a deterrent, particularly where the investor doesn’t have any losses to set off against those gains. The good news is that under current tax law, it is not necessary that the investor die in order to allow his or her heirs to take advantage of the step-up in basis so that the gains in the investments can avoid the capital gains tax.
Where an investor has total income from all sources that is lower than the top of the 12% tax bracket plus the standard (or itemized) deductions, the tax on that portion of income which is capital gains will be zero.

Are Annuities an Asset Class?

Recent articles in the financial industry press have suggested that annuities should be considered as an asset class for investors seeking to reach an optimal allocation for their investment portfolios. It comes as no surprise that for the most part these articles are written by and for insurance companies which are the creators and sellers of annuities. (In the interests of full disclosure of potential conflicts with their customers, it is useful to know who is touting these products and why).
First, it is important to understand that an annuity is a contract with an insurance company and the insurance company takes the investor’s money and invests it in equities and bonds and other traditional asset classes so as to be able to pay for its promises to the investor, along with expenses.
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