ira

It Goes Up and Down: Some Questions for a Moment Like This

graphic shows "up" and "down" on a chalkboard with checkmarks next to them

The history of the stock market can be summed up pretty well: it goes up and down. As for the future, we cannot know for certain whether it will continue to go up and down—or on what schedule—but it seems reasonable to take the liberty of guessing this whole “up and down” thing may persist.

When things are down 20% from their most recent peak, and we recognize it goes up and down, this may well be as good a time as any to invest.

We might have a recession, but current lower prices already reflect a lower outlook. You could say sentiment is already in the mix, already baked into prices. And anyway, where there’s a recession, there’s surely a recovery to follow.

Do we know the timing? Nope. But we never do. (That’s where the whole up-down thing comes back into focus.)

There is much we do not know, but we have faith that perhaps our guesses may be good enough to get by. We believe, for example, that in the future there is money to be made by companies that meet our needs. We have a hunch we will continue to eat, shop, entertain ourselves, wear clothes, go places, communicate, create, and do all those other things humans tend to do. And we have an opportunity now to invest in companies that could provide those things then.

Clients, some things to consider at such a moment as this:

  • Is there room to start or add to a Roth or IRA?
  • Should some funds in a stable-but-stagnant form perhaps be invested for long-term growth?
  • Would a Roth conversion make sense given these lower prices?

It goes up and down. And when we invest for the long run, we commit to the ups and the downs both. One never knows when the trend will change, just that it very well may.

If it’s time for you to add to long-term holdings, please email us or call the shop—anytime.


Want content like this in your inbox each week? Leave your email here.

Play the audio version of this post below:

It Goes Up and Down: Some Questions for a Moment Like This 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

The Swiss Army Knife of Finance

photo shows a Swiss Army knife

Some people consider the Roth IRA the “Swiss Army knife of finance.” A versatile tool, a Roth is useful in a lot of different circumstances. It might make sense to run through a review before year-end: your 2020 income tax situation may have an impact on your thinking. 

Here are just a few uses of the Roth IRA to consider:

1. They can help you manage your lifetime total taxes. 

You may be able to take advantage of relatively lower tax brackets now before income tax rates go up, as they are scheduled to after 2025 or in the case that future legislation raises tax rates. Converting existing retirement balances to Roth makes the amount converted taxable now—but wipes out taxes on future gains. 

Moving temporarily depressed holdings from traditional IRAs to Roth involves paying tax only on the lower current value. Any recovery ends up being free of tax. (Airlines are an example of depressed stocks that may recover. No guarantees of course.)

2. They can add flexibility to your retirement planning.  

Unlike traditional IRA balances, Roth IRAs do not have required minimum distributions (or RMDs). And they are a useful place to go for large retirement outlays without making a bulge in your tax bill. Planning to buy a second home, boat, or camper in retirement? Roth money might come in handy then.

3. They can make great gifts. 

Roth IRAs can be wonderful for children or grandchildren with earned income who qualify to make Roth deposits because they have earnings but lack the funds with which to make deposits. Growth over the decades ahead may never be taxed.

4. They can help fund an education. 

Parents seeking versatile education funding for their children may use their own Roth IRAs as a source of funds for that purpose. If not needed, the money may remain in the Roth and ultimately help fund their own retirement. 

Right for you? 

Again, the Roth is a versatile tool! What from the list is jumping out to you? 

We understand that the end of the year can be a busy time. We would love to help you sort out these issues—just email us or call if they are pertinent to you. 


Want content like this in your inbox each week? Leave your email here.

Rule Change: IRA Required Distributions

canstockphoto45286234

Legislation intended to ameliorate the effects of the COVID-19 pandemic changed the rules on IRA required minimum distributions.

The SECURE Act passed in December 2019 changed the beginning date for required distributions to the year after you turn 72. This applies to people who turn 70 and a half after last December 31st. Otherwise the old rule applies.

However, the CARES act signed in March wipes out any required minimum distribution for 2020. IRA owners may still take distributions at their option, but the Required Minimum Distribution does not apply. Taken together, these laws give IRA owners new flexibility.

Your personal situation may be affected by these changes. Your cash flow strategy, Roth conversion strategy, or tax strategy may need additional thought. Or you may want to revisit your retirement account investment strategy. Retirement accounts may be a significant portion of invested assets.

Bottom line: clients, if you would like to talk about how these changes affect you, please call or email us.

Hammer or Pliers?

canstockphoto14054970

Recently a client asked us a common question. With a little room in the budget, should more money be added to retirement savings, or a regular investment account? Which one is better?

Of course, the answer depends on the situation. In the early and middle career stages, one might not put funds to be used before retirement into a retirement account. Saving for intermediate term goals like buying or trading homes, or buying a boat or camper, perhaps should be done outside of a retirement account.

But getting it down to fine points, some retirement plans have provisions for using money before retirement without penalty. We believe you can gain an edge by paying attention to the fine points. We like to outline all the alternatives so you can make a good decision.

On the other hand, money to be devoted to growing the orchard – a pool of capital that you may someday live on – should almost always be sheltered from taxes, if possible. This typically means into some form of retirement plan. The tax advantages may make a big difference over the years and decades ahead.

And retirement plans come in different flavors. Individual retirement accounts, employer plans of various kinds, Roth… there are many options.

Just as one cannot know whether the better tool is a hammer or a pair of pliers, one cannot know the best way to invest without understanding the job the money is supposed to do for you. That’s why we talk back and forth! You ask us things about our area of expertise, we ask you things about yours. A meeting of the minds is just the thing to make progress, with a collaborative process.

Clients, if you would like to talk about this (or anything else), please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.