Tactics

Spare Time and Extra Money
Person looking out at the sunset.
by Mark Leibman, President

When we were a young family, two things seemed to belong in the the same mythical category as unicorns and leprechauns: spare time and extra money. These ideas sounded magical to us!

We usually had enough time and money to get by—usually—but life was often harried and hurried, and children have needs that sometimes require money to obtain. Then our children grew. The joys and pains of that chapter subsided over time, replaced by new circumstances and challenges.

There’s been an interesting theme to a few recent conversations with clients who are about my age—call it “sixty-something.” Reviewing their overall position, one person remarked they never planned on having so much money.

Another was trying to get perspective on the sense of buying a new vehicle to replace one with 100,000 miles. We came to the conclusion they had $600,000 more than they needed in their long-term portfolio.

And then there are folks scratching their itch to be more generous to causes and people than they ever imagined, with wealth they had never dreamed of.

It seems we caught the leprechaun. We saw the unicorn. There is such a thing as extra money. And the way compounding works, an extra half-million now might turn into an extra million, then two, if we live long enough. No guarantees, but in our opinion we’re liking the general trajectory.

This phenomenon brings deeper meaning to our refrain “invest wisely, spend well.” If you find yourself ahead of schedule on your goals, we’re more likely to put it this way: “Don’t pass up too many chances to have fun.”
Life is short, we’ve discovered.

Interestingly, the people we know with extra money now seem to have one thing in common: they invested 1) effectively 2) over a long period. They did not fall for the smoother ride to a poorer future; they knew that the ups and downs are an inherent part of striving for real investment market returns. In bad markets, they were not scrambling to sell out. They stayed the course—or added more!

No guarantees about the future, of course. Clients, if you would like to talk about whether or not you might be on track, please email us or call.

Oh, one more thing about spare time: it has remained elusive. Maybe it’s still out there, somewhere, with the leprechauns and unicorns.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.

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Solid Ideas from an Absurd Sitcom

For a show where “nothing happens,” there’s still something captivating about Seinfeld! Maybe it’s how the characters show up for each other and keep at it, even when life is absurd. Is our own support system pointing us in the right direction?

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Three People in One  

by Caitie Leibman, Director of Communications 

We never make decisions alone.

No—we’re not talking about all the different people we might consult when making a decision. We’re not talking about the family members, loved ones, or trusted counselors in our lives that help us navigate the big stuff.

Instead, we’re talking about what happens in our own minds. We never make decisions alone because there are always at least three different versions of us in the mix! This idea has been explored by a number of researchers who study the psychology of happiness, and writer Laura Vanderkam has summarized it really nicely in her work.

Basically, our decisions are always happening by committee:

  • There is the “you” who looks forward to things, who plans or even worries about the future: that’s the anticipating self.
  • There is the “you” who is right here today, living life: that’s the experiencing self.
  • There is the “you” who gets to look back, reminisce, and savor memories: that’s the remembering self.

The challenge is that only one of these people has to live out the costs of each choice: the experiencing self. Consider an everyday example… Should I go for a walk this morning?

“Nah, too cold,” says the experiencing self. “I’m tired.”

“But think of how energized we’ll feel after we walk,” says the anticipating self.

“Yeah, that’s how we felt last time we didn’t want to take a walk but then we did,” says the remembering self.

“Yeah, but you bozos don’t have to find clean socks, or bundle up, or drag your behind out there, or clean the floor after we track our shoes inside. I do!”

And that darn experiencing self isn’t wrong. But it doesn’t mean she should get the final say every single time. Do you hear the good points the other two have to offer? They’re not wrong either.

The experiencing self—the one that lives here, does a lot of the lifting, and has to deal with discomfort—has a disproportionate impact on two other really important people: your anticipating self and your remembering self. It’s a huge opportunity.

That anticipating self is teeing up some good stuff for you. She’s planning for retirement, investing wisely so that you might spend well. Making the most of those chapters of life is something you can do to honor her effort.

The remembering self might be savoring your choices for decades. What kind of experiences do you want to give her to work with? How do you want her to look back on you?

It’s not about getting every little thing in life just right. Sometimes, a walk is just a walk. A sandwich is just a sandwich. A paycheck is just a paycheck.

But from time to time, it’s good to zoom out and see how these three people are getting along. When our plans, experiences, and memories are working together, life can feel very rich.

What are you savoring from the past, enjoying in the present, or looking forward to in the future?

No matter where you find yourself, we’re wishing (all three of) you some peace, comfort, and joy today.

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2024 Outlook: Opportunities and Threats?
A telescope on a stand

The start of the New Year is a natural time to take stock—and appraise the opportunities and threats we investors may face.

Many Wall Street firms, market pundits, and fellow investment advisors like to weigh in on what lies ahead. Some are quite detailed about which sectors of the market may shine or fade, whether interest rates are going to go up or down, and what the economy or the markets or the Federal Reserve are likely to do.

Here at 228 Main, we have a slightly different approach. Because our time horizon extends beyond the months ahead, we are thinking about how the next seven, fourteen, or twenty-one years are going to play out.

Just a few of our Research Team’s theories about companies, industries, and society illustrate this expansive timeline:

  • The leading player in a growing, fragmented industry is likely to continue consolidating the industry, gaining market share, and exploiting its economies of scale in the decades ahead.
  • The cost of connectivity and computing power and data storage will continue to fall—as they have for decades past—for many years to come. More chips in more places connecting in more ways than ever before are going to have an impact on companies that facilitate or profit from these trends.
  • In the future, we humans will still need places to live, ways to move around, and food to eat. Enterprises that meet those human needs will continue to see demand.

You may note that none of these depend on any of the details that most “2024 Outlook” reports focus on. We’re not all tied up in knots about the possibility of recession because we already know that the next one is coming (and so is the recovery which will inevitably follow.) And what will the Federal Reserve do? It literally does not matter, over our time horizon and yours.

The opportunity in 2024 is the same as always: to employ a longer time horizon than others, to be more patient with fluctuating markets, and to focus on the fundamentals of specific opportunities—not the frenzy about things outside our control.

And the threat in 2024 is also the same: the risk of getting caught up in short-sighted ways of looking at things, of following the crowd, of letting persistent pessimism into our brains.

In our opinion, it’s more fun our way!

All of us here at 228 Main want you to know that in 2024 we are going to continue with the values and principles that brought us to this moment, always seeking to refine our strategy and tactics as the future unfolds. That’s our “2024 Outlook.”

Please email or call, if there are things on your radar for 2024 that we should know about.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results. This material contains forward looking statements and projections; there is no guarantee that any forecasts made will come to pass.

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Beginnings and Endings

As the end of the year draws near, it makes sense to look back on where we have been—and to look forward at the path ahead.  

Our lives have threads; the life of our shared enterprise here at 228 Main does, too. One thread is talking with you, meeting you where you are, striving to connect your money to your life. Other threads pertain to finding worthy opportunities in which to invest, managing your portfolios to take advantage of that research, and communicating with you about what we are doing and why. 

It’s been an interesting year! The markets have been challenging. Disruptions continue to affect some aspects of the economy. 

Change brings opportunity, of course, and we are always thinking about opportunities. Our underlying theory is that we persist, some will innovate, and we end up sooner or later with record levels of GDP, income, and wealth. No guarantees, of course. 

In other words, a lot happened in 2023, but the big story has not changed. We are looking forward with anticipation to 2024. 

My sense is that we’re more capable than ever of taking care of business for you—with more time spent by more people searching for opportunities, managing portfolios, attending to the details of service, and communicating with you in more ways than ever.

Clients, what are your plans and planning for the New Year? Any parts you’d like to talk about with us? Email or call, any time. 

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A Toast to William Roth
Person putting a coin in a piggy bank.

Approaching this season of holiday cheer, we are thinking about William Roth—and may even raise a glass in his honor.

Senator Roth was instrumental in creating something new. It appeared in the Tax Reform Act of 1997. And it has some wonderful features. It’s…

  • A retirement account, but after five years you may withdraw your deposits for any reason without tax or penalty.
  • A retirement account, but it may be used to educate your children or grandchildren without penalty or tax.
  • A retirement account, but there are no income taxes due on withdrawals during retirement.

The Roth IRA, as we know it, is a useful addition to the plans and planning of many people. Contributions may be made by those with earned income (but not too much earned income: there is an upper limit.) Conversions from traditional IRAs may be made by anyone willing to pay tax on the converted amount.

You may be eligible to put up to $6,500 into a Roth IRA for 2023, anytime until tax filing time in 2024. And the limit for 2024 is $7,000. And those of us lucky enough to be 50 years old or older could contribute an extra $1,000 beyond that as a catch-up.

If you have traditional retirement accounts, you may be eligible to convert part to a Roth IRA. There are no income limits on conversions; if you believe tax rates may be higher for you in the future, it might make sense to do a conversion. These happen on a calendar year deadline, however, so 2023 conversions must actually be done in 2023, for example.

Although a Roth IRA may not be right for everyone, the concept was and is right for me. I’m getting tax-free capital gains, tax-free dividends on blue chip stocks, and tax-free interest because I have investments inside a Roth IRA.

And I can take funds out and spend them (or give them away), any day, with zero tax.

If this might be right for you, please email us or call.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

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Three Words You May Need to Know: Required. Minimum. Distribution. 

If you are of a certain age and have certain retirement accounts, you probably need to know about the annually required withdrawals from those accounts. The IRS calls them “Required Minimum Distributions”—RMDs.

One special note: Clients, many of you are already treating your retirement account like an orchard, taking out the fruit crop each year to live on. The RMD is not an “extra” amount on top of the crop: it is just a minimum. If you are already taking out 5% in monthly payments to fund your retirement, you don’t need to worry about what happens at age 73.

We’ll talk about the details here, then how it works out in practice.

People born in or before 1950 with any form of retirement account (other than Roth IRA) have already begun doing this RMD process each year (or should have). People born in 1951 or later will have to begin by the year they turn 73.

The actual amount required is a function of age and the prior year-end balance. For example, a 73-year-old has to take out a little less than 3.8%. In round numbers, this would be $3,800 per $100,000 in the account. But that fraction goes up a little every year: 80-year-olds are closer to 5%, 90-year-olds have to take out more than 8%.

Basically, the RMD needs to be calculated for each retirement account you have (except Roth IRAs). You must take out the total amount required by December 31, and you will receive a 1099-R showing taxable income.

Clients, you know we pay attention to this and strive to keep you informed about what needs to be done. But there’s one thing to be careful of: take this as an opportunity to check whether there is some account somewhere that we don’t know about, like a 401(k) from a former employer, an odd IRA balance somewhere, 457 or 403(b) plans, and so on. It happens, but it would be a pain to get yourself into some trouble over an account that’s been out of sight, out of mind.

Some people may choose to use the onset of RMDs as a time to consolidate all of their retirement funds into a single rollover IRA, to make this process simpler going forward.

One of the advantages of Roth IRAs is that they have no RMD requirement. As a matter of good planning, it may make sense to convert partial IRA balances to Roth, pay tax when you choose, and whittle down that balance that is subject to RMDs in traditional retirement accounts.

There are lots of ways to handle things! If you’d like to talk about it, we’re here for it. Email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

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.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

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Three Words You May Need to Know: Required. Minimum. Distribution. – 228Main.com Presents: The Best of Leibman Financial Services

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Are We on the Ship of Theseus? 

The legend goes like this: after the Greek hero Theseus slayed the minotaur and saved a bunch of people, he escaped on a ship. Later, to honor him, the people of Athens would take the ship out each year and sail it on a pilgrimage. 

As time passed, the people had to replace an odd plank here and there. The boards of the ship would decay or break, as boards do. It’s basic maintenance. 

But a question emerged. After generations, the ship reached a point where none of its pieces were “original,” so to speak. So… was it still the same ship? 

This is mostly a philosophical question, but it offers an interesting puzzle about the nature of things in our everyday lives. This enterprise comes to mind. When I, Mark, started Leibman Financial Services at my kitchen table in 1996, there was no telling that the business would become what it is today. 

And yet, we haven’t changed anything fundamental about what we’re doing here. I set out to build something that would let me try to help people grow their buckets. I operated with the understanding that when others are better off, I probably will be too. 

Those things still stand, today. The ship is still a ship. 

But my life looks radically different from when I first set foot on this ship. Two of my co-owners were still children at home with me. (And we wouldn’t even meet our other co-owner for another decade and a half!) 

In what ways do things change—and how do they stay the same—as they grow? The ship remains, but it is not the same. 

This type of conversation might sound familiar. We’ve enjoyed talking about similar ideas before, like how things have the potential to become greater than the sum of their parts, how “teamwork makes the dream work,” and how we never step in the same river twice. 

No matter how you think about it, it can be amazing, this whole “life” thing. It’s a privilege to be here, building something with you. 

Come by to chat about this or anything else, any time. 

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In and Out of the Comfort Zone  

Once there was a man who was never satisfied, who always wanted more. He always needed to get to the next level. He had a goal of making a million dollars a year, then he wanted two million, and then a million a month, then two million a month. And that was not enough, either. He had wealth, he had fame, he had all the stuff money can buy, but he never had enough. 

Some preach that this striving is a virtue. “You can’t make progress unless you are willing to get out of your comfort zone.” Carried to the extreme, the mindset seems like a treadmill—or a trap, even. Always pushing, never satisfied? Sounds like it could be a sad way to spend one’s life. 

On the other hand, a friend told us a while back about her grandmother, who always said, “I have enough, and enough is as good as a feast.” One imagines that Granny was as content with life as a person could be. 

But taking that to the extreme, where would progress or innovation happen if everyone resigned themselves to living with things just as they were? Would anything change in a world where everything was perfectly comfortable and everyone had what they needed already? 

It is for each of us to sort out what we want out of life, how to get it, and the meaning of happiness. And that might mean figuring out what we need to do differently to get there, and then recognizing it once we have gotten what we need in terms of money and stuff. 

Then, once we’re comfortable in one area, we might turn our aspirations to more elevating topics—maybe helping family, developing new skills, or improving the community.  

For instance, can you imagine a community rec center in our little town? Or a scholarship endowment whose income would help any graduating seniors on their way to a trade or to higher education? More vibrant community organizations? These are some of the next-level things I’m dreaming about. 

We can be comfortable with what we have, and we can exercise our ambition to make the world better. We enjoy the satisfaction of our comfort zone in some ways and move ourselves out of it to dream big in other ways. 

Clients, if you would like to explore the ins and outs of your comfort zone, email us or call. 

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Spending Smarter

Our brains are so good at getting used to things that they will keep chasing new pleasures, new experiences, and the next thing to bring us a boost. But research shows there’s more bang for our buck by treating ourselves more frequently, in smaller doses—and our wallets might thank us. 

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