Hope, optimism, belief, notion… In our line of work, it doesn’t matter how you say it. We’re banking on the idea that, overall, we’ll see more up than down.
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Month: February 2023
Getting Down to Brass “Tax”
While paying taxes is generally a good sign that you are making money, it seems most people want to avoid paying more tax than they need to. It’s a common enough question we field, and one worth considering.
How do we handle the tax impacts of our choices?
For smaller investors with tax-deferred vehicles like IRAs or 401(k) plans, tax considerations are simpler. Only deposits and withdrawals have any tax implications (and for Roth IRAs, rarely even then.)
Things get more complicated for investors with substantial balances outside of retirement accounts: most trading activity has tax impacts. You pay taxes on interest and dividend payments; you also become subject to capital gains tax when selling investments.
The principle of capital gains is straightforward enough. For instance, if you buy stock for $100 and later sell it for $100, you made no money and owe no tax. If you were to sell it for $110, you would have to pay some percentage of the $10 profit in tax (but not the rest of the $100: that was money you had in the first place.) And if you sold it at $90, you would have a loss of $10 that you could use to offset taxable gains elsewhere.
The important thing here is that the IRS generally only cares about the value of investments when they are bought or sold. If your $100 stock position balloons up to $1,000 one year and then collapses back down to $100 the next, the IRS has no interest in the round trip. They only see the difference from your original purchase, regardless of how high or low the price got in the meantime.
It is easy to despair when an investment is underperforming, but according to the IRS, those losses do not exist until you decide to sell. And if a high-flying investment should pull back from its highs, the IRS would give you a very funny look if you tried to claim it as a loss.
So if the IRS does not care about your gains or losses “on paper,” why should you? A drop is not a loss, and value at inception is a great anchor to come back to when you need a jolt of perspective.
And if after all this you find yourself with more resources than you would need in your lifetime, there are estate planning opportunities to consider. If you are sitting on long-term investment gains that you do not think you will be spending, there is little reason for you to sell those holdings and pay taxes on your gains yourself.
If those assets are passed down to your heirs, however, they would generally only need to worry about gains made after they inherited them, so whatever gains you accumulated during your lifetime can pass to them tax-free.
Lots to think about! It’s an important topic for many investors. Clients, when you need to talk about your tax considerations, please reach out.
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.
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What the IRS Knows: Getting Down to Brass "Tax" – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
We Need What We Need, But We Want What We Want
We’re big fans of making the most of things. But it takes a little perspective to learn how to prioritize our goals. What are our very next needs? What are the wishes that can wait?
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Looking Out for the Ones We Love
We’ve had plenty of conversations recently with people in their working years. It’s reminded us of a basic fact: family dynamics and money can create a lot of angst for people of any age. The issues of aging may be about universal to the human experience, but the particulars have to be navigated family by family.
We’ve seen these topics from many angles. They are pertinent for aging couples, vital for singles. Couple dynamics usually involve one taking care of the other; when there is no “other” in the household, that support system must be found elsewhere. (Trust me on this: I’ve lived it!)
When the dynamics in a family start changing, it can feel concerning for those in the younger generation, too. The questions we’ve fielded are as varied as the families:
- May an adult child or someone else do business on behalf of a parent who is not able to?
- Are there sufficient resources to take care of the health needs of the parent?
- Is there a plan to be sure assets are titled properly and headed where they should be in the event of death? How do we avoid spending unnecessary time, energy, taxes, or legal work when the time comes?
- What are the roles of Medicare and Medicaid?
- Should we be aware of any scams or elder abuse that could be a threat to a parent?
- Who makes health decisions on behalf of a parent who is not able to?
- Where is the information survivors would need to settle a parent’s affairs?
The ideal scenario is that a family goes into any major event with clarity, already: that the senior generation’s plans and intentions are already made known, that they’ve communicated their wishes regarding health care principles and the ultimate disposition of their estate. And sometimes we arrive at a big moment and need to work with what we have.
If you are concerned about a parent, an initial call can help us understand your questions, point you to resources, explain how things might work, or make plans for a meeting with the parent.
If you are a parent and would like to make sure your plans and intentions are carried out, let’s talk.
In all cases, better communication usually reduces stress. Assets are the result of years or lifetimes of work and effort. We believe that planning to make sure they do as we intend is one way to respect that work and effort.
Call or email to get a conversation started: any moment can be the right moment to start.
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When the Price Is Right
Who doesn’t love a bargain? A savvy searcher knows that there’s more than one type of opportunity. What does this mean for our portfolios? More in this week’s video.
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The Doing Gets Things Done: We Are Planning for the Plan!
Many things are made by combining some of this, some of that. In our work with you, for example, we combine some information about your life now with a vision to get us ready for the future. Here as another new year begins, our thoughts have turned to plans and planning—and the nuances therein.
A typical New Year’s resolution is a sweeping, major goal: write a book, finish a 5k race, lose this many pounds. They tend to skip a few steps. It’s about the accomplishment, not the accomplishing.
But it could be more effective to plan a tiny step, something to execute now.
Write a page.
Walk around the block.
Eat a nutritious meal.
And if we focus on accomplishing a tiny step, then another, then another, those steps may compound into major accomplishments.
You might recognize the idea at the heart of this formula: habits are the practical foundation in shaping the person we want to become. Writing one page, then another, then another. If it becomes a daily habit, you may end up authoring a book.
Likewise, it’s easier to save something every payday than it is to worry for years about the fortune you will require for retirement. We can invest by automatic monthly deposits, for example, instead of having to think about it every time.
When we can make our habits automatic, they become a lot easier to maintain. (We don’t stop and question whether and how and when to brush our teeth each day, right?)
The planning moves you closer to the plan; the doing gets things done. Wisdom? Nonsense? You decide.
When you are ready to work on your plans and planning, we’ll be happy to talk with you about the steps that may help you get there. Email us or call.
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Play the audio version of this post below:
What Do We Mean by "Plans" and "Planning"? – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
Let’s Talk It Out!
Converse, communicate, babble, blather, rant, rave… I love to talk! Preaching to the choir, but it’s worth reminding everyone: I’m here to do this. By choice. More in this aptly-titled video.
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In Which Numbers and Feelings Become Better Friends
“We figure out what we want with our feelings. We learn everything we can learn from the numbers.” — Me
Sometimes new clients are surprised when most of our work together is conversation. There’s very little button-clicking on a computer that will do us any good while we’re meeting. And there’s no chart or binder just sitting in my office—or anywhere!—that can tell us what we need to know:
- What does money mean in your life?
- What are your goals?
- What’s working? What could be better?
There are choices to make that do involve some math, of course. That’s a big part of our role. But your job? Figuring out what you want and how you feel about how to get there.
In their book No Hard Feelings, Liz Fosslien and Mollie West Duffy explain, “When people talk about decision making, they tend to assume that feeling something and doing something with those feelings are the same thing.” Some folks notice a feeling swell up in the process and try to shoo it away, thinking it will only gum things up. Surely, if we “open the floodgates, we’ll be bowled over by the crush of our emotions.”
But that’s not giving ourselves much credit, is it? Gut feelings aren’t random signals. They can be clues to our self-knowledge. Ever bought a house, juggled job offers, or gone on a first date?
Our feelings can help us figure out what we can live with and what we cannot. And as we’re fond of saying, “your money, your life.” No matter what happens in our conversations, clients, you’re still the one that has to live with your life—not us.
We’re here as collaborators, coconspirators… you get the idea. Reach out when you’re ready.
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Play the audio version of this post below:
It's All About the Numbers and Feelings but Also Numbers and Don't Forget Feelings – 228Main.com Presents: The Best of Leibman Financial Services
This text can be found at https://www.228Main.com/.
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