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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billy garver
The Future Is Uncharted Territory
There’s no map for where we’re headed: doesn’t mean we need to fear the future! This is the business of building our own way.
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Here Be Dragons!
It is hard to imagine embarking on a long trip these days without the use of technology. Hours spent studying an atlas have been replaced by seconds of typing in your destination. An additional quick search alerts you to nearby fueling stations, rest stops, lodging—all the known resources along the way!
Long before GPS and atlases (and even truck stop chili dogs!), explorers had no choice but to set off toward destinations unknown. Cartographers would sketch the journey as they went, creating a compounding resource of information.
If the destination proved fruitful, the voyagers would have a way to return with their bounty. If nothing of interest materialized, well, at least they knew to no longer waste their time in that direction.
Looking over some of the earliest explorers’ maps, you’ll see intricate details of the paths traveled. You’ll also find, in some of the unmarked terrain, the words, “Here be dragons!”
Two possibilities might explain the drama of such labels. There’s fear, and there’s greed.
The fear: the harrowing journey brought such new and challenging experiences that they convinced themselves dragons are indeed real and are probably lurking in those unexplored pockets of the world. Thus, shouting ensues… “Here be dragons! Stay away!”
The greed: there could still be interesting stuff out there, so it was worth trying to scare off those other explorers.
Clients, we’re in the business of uncharted territory: the future isn’t mapped out for us. You can hear the shouts of other supposed explorers all day, every day. Dragons, treachery, treasure… It’s enough to throw anyone off course.
But luckily for us, we have our guiding lights—our principles, our goals—to keep us on track. Dragons be darned!
Clients, questions or concerns? Reach out anytime. It’s our pleasure to explore alongside you.
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Play the audio version of this post below:
Here Be Dragons! – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
An IRA for All Seasons
Maybe you’ve heard the phrase “kiddie IRA”: it’s not a technical term. It refers instead to the use of a Roth IRA to help a young person start their investing career. Never too young?
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Saving Summer
In the United States, as in most places in the world, we are governed by the Gregorian calendar. But whether we’re watching our youth fling their mortarboards into the air or we’re flipping the page and entering the “-ber” months, many of us are facing once again the power of the all-important academic calendar.
Children, grandchildren, and neighbors will be out of school for the summer for at least a few weeks in most parts of the country, and it’s got us reflecting. Without school, summer for many families can include more sleepovers or late nights and long chats on the porch. It could mean hours at the city pool or the anticipation of a big vacation.
For some of us, summers have also meant more leisure and more work.
It’s possible that you earned your very first dollar—and then some, hopefully—one summer long ago. Teens are more likely to be employed during June, July, and August than any other time of year. And it makes sense: teens are more likely to have the time and opportunity then, as jobs like lawnmowing, babysitting, and lifeguarding peak each summer.
Clients, if anyone in your household under age 18 was out making money this summer, consider talking with them about the “Swiss Army Knife of finance”: the Roth IRA.
As long as someone has earned income (and doesn’t make more than the cap), they can contribute to a Roth IRA (up to the maximum amount). This means they might contribute up to the smaller of $6,000 or their 2022 total earned income.
Say your child or grandchild earns $3,000 in the summer: they could contribute up to $3,000 to a Roth. Of course, they may not want to forfeit all their earnings, but if they’re able to, this may be a prime opportunity to impart the value of saving. If you’re feeling nice, you could “gift” them the $3,000 to replace what they saved. Better yet, offer them a match: you pay them back some percentage of what they save.
Roth contributions are taxable now and enjoy tax-free future gains. Beyond the magic of compounding, starting a Roth account early has other benefits:
- At any time, you may withdraw contributions without facing a penalty or taxation.
- Beginning five years after the Roth was opened and funded, account holders can take out up to $10,000 (earnings and contributions) to fund the purchase of their first home, tax- and penalty-free.
- Beginning five years after the Roth was opened and funded, account holders can use it to pay for qualified college expenses, penalty-free (earnings will be taxed as regular income).
As children near college age, investors may have questions: the government does not include retirement accounts as assets in the calculations for student aid, so this type of savings vehicle should not impact the availability of federal financial aid.
Withdrawals would be counted in the calculation, but be aware: the FAFSA uses a “prior-prior year” income picture to avoid having to base their decisions on estimations. So, for example, even withdrawals made in a 4-year graduate’s junior year shouldn’t affect their aid eligibility.
The process of getting something like this set up isn’t terribly complicated. It is not necessary that the working person have a W-2, though we do recommend keeping records (think: basic invoices or even simple receipts from the neighbors for those lawnmowing or babysitting services).
Clients, could this be a way to help your children or grandchildren preserve a piece of summer? Call or write, anytime.
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 59 ½ 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.
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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Play the audio version of this post below:
Saving Summer – 228Main.com Presents: The Best of Leibman Financial Services
This text can be found at https://www.228Main.com/.
Collaboration: It’s a Team Effort!
Clients, looking back over these decades together, the word “collaboration” is what comes to mind for me. I have worked with some of your households for years, and I am most proud of what you and we have created together. Successful investing requires effective attitudes and intentional actions with money. You, the best clients in the world, have been stellar partners in this regard. It has truly been a team effort.
But I’m realizing that “collaboration” will have even more meaning for our work in the years and decades ahead. The success we’ve enjoyed together has resulted in an enterprise that is now beyond my ability to run by myself (and not that I would want to—to my estimation, the gang and I seem to be having a pretty good time together!).
Greg Leibman became an integral part of the effort a long time ago; Caitie Leibman and Billy Garver bring us perspectives and skills we formerly lacked and now rely on.
Two of our core activities are investment research and portfolio management. With the increasing wealth you’ve brought to us, these activities are more important than ever. Our capacity to do them depends on the team we’ve assembled. It’s a collaboration that’s become vital to our daily work.
Even as we conduct our work as a team, however, I remain the regulatory head: as an Investment Advisor Representative of LPL Financial, I am the business structure. The others, on paper, are technically assistants working under my direction.
This regulatory structure is a vestige of the days when this was a one-person operation, and it no longer aligns with what we’re trying to do here. So, for the rest of the year, we plan to work toward restructuring our firm as a Registered Investment Advisor: this arrangement should more clearly reflect how we can best serve you in the years and decades ahead.
Friends, you know about my intention to work to age 92, and that is still the case. But I also believe that part of my responsibility to you is to help shape an enterprise that can outlast me. The mortality rate remains 100%, so sustainability is the watchword here.
A team format—four officers, working collaboratively—gives this entity some of the durability it deserves. Fortunately, LPL Financial has developed plans and processes for this exact scenario, which is not unique to us. I’ve not lost my sense of gratitude for what LPL Financial has meant to my family and me; your funds will continue to be custodied with them. Account numbers and history and online access and statements and all that will remain essentially unchanged.
There will be just a bit of paperwork to transition each account. Details will follow as we learn more.
It will take the balance of this year for us to continue this work and implement the new structure. Clients, we will be in touch with more detail about this journey as it unfolds—and we are excited to get things more aligned with the big picture.
Please email us or call with questions or comments. Thank you all again, for everything.
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Play the audio version of this post below:
Collaboration: It's a Team Effort! – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
Retire Now, Work Later?
We are in the business of talking, and nearly all of that talking is with you: we’re in the pursuit of connecting your money to your life. Often, we talk about saving for and spending in retirement. You’ve heard us talk about the strategies available with Roth IRAs, in particular, a few times before.
We still believe there are advantages available here for many investors (never being taxed on gains, of any size? yes, please). But we want to add to the mix another idea. We’re recognizing a trend that merits consideration.
Life for some can seem quite linear: each milestone follows in turn. You’re born, you go to school, you work, retire, and that’s that. A straightforward path, right? Now, we’re seeing more journeys that look like they swoop around, like life is written in cursive.
Some of these deviations have been becoming more common, like a “gap year” to gain more experience out in the world after high school but before college. This is a swoop we can choose and plan for.
Other deviations are more like being thrown for a loop. On short notice, some of us find ourselves stepping away from work to care for a parent—or other family member—due to a growing health concern. Others may discover what we want later in life and find ourselves taking on seasonal work, with long stretches for travel or other passions.
The traditional retirement savings vehicles were engineered for more traditional retirements. They are likely to assess a 10% penalty for withdrawals before you turn 59½-years-old. While you can take contributions out of a Roth IRA penalty-free, doing so also takes away the chance to grow more tax-free income for the future (the opportunity for growth, not a guarantee of such).
If there’s a chance that Future You would like to retire in stages or in a unique order, this swoopy life may be something to start talking about now. We have friends who are preparing to travel the world while they still can; we have friends planning to be available to a loved one when they need it.
What’s on the horizon for you?
It could be that a balanced taxable account may be a useful complement to traditional retirement holdings. You would pay tax on capital gains, but if you won’t be earning income—or will earn considerably less for a spell—your tax rate may be lower anyway.
Want to talk through what this could mean for you and yours? Let’s talk, anytime.
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 59 ½ 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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Play the audio version of this post below:
Retire Now, Work Later? – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
Throwing Yourself for a Loop
Sometimes life’s big milestones arrive in a neat, straight line. And sometimes that’s just not what happens—or what we want to happen. How do we plan for a swoopy life?
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Getting Back to Basics
The pandemic forced many companies to shake things up. But perhaps because of these challenges, some of the most basic, “boring” companies on our radar have been making some of the most interesting changes!
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Which Came First? The Bargain or the Growth Stock?
It’s a classic thought experiment. “Which came first: the chicken or the egg?”
Clearly, the egg came first; that’s where chickens come from! But, wait. Who laid the egg?…
There’s a similar conundrum found in our work. In business and investing, we like to look for strong companies—ones that spend wisely, save well, and try to build an enterprise that can remain durable across changes in the economy. Often, these companies must have a strong balance sheet (i.e., more cash than debt) in order to grow to the size of an industry leader.
Clients, in the early stages of the pandemic, we invested in some companies leading their industries. Our original investing thesis was that even if the virus took its toll and a worst-case scenario occurred, people would still need the staples.
People would still need groceries.
People would still buy meat.
People would still order prescriptions.
While we were sure these everyday items would be impacted by pandemic life, we also believed they would likely survive—in one form or another.
Now many of these market leaders have been able to use the resources of a market leader to continue to evolve and transform organically. They may seem like “boring” companies on the surface, but in times of challenge, they are acting like growth stocks: many have been the first-movers among their peers, making plans that could shift their whole industries.
And believe it or not, we bought some of these companies as bargains. So which came first?
It’s fun being us. Clients, we are always looking for opportunities. Are you seeing anything that we should be watching? Let us know. And when you want to know more about what this all means for your portfolio, call or write.
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Play the audio version of this post below:
Which Came First? The Bargain or the Growth Stock? – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
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