retirement planning

What the IRS Knows: Getting Down to Brass “Tax”

photo shows a light letter box with the word "TAXES" sitting on top of various cash bills

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

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A Terrible Case of the “Shoulds”


Better sleep can contribute to a longer life. Who are we to get in the way of your peace and calm? Your choices are yours. Don’t let anybody “should” all over you!


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The Great Myth of Mind-Reading

photo shows a large white question mark on a chalkboard

A friend of ours tells the story of an argument they once had with a parent. Both parties got more and more frustrated, realizing that they were not on the same page—and things were only getting more tangled.

Things escalated until the parent threw their hands up helplessly and yelled, “Listen to what I mean, not what I say!”

Funny, huh? Yet it sounds so familiar to many of us.

We do our best here at 228 Main to express ourselves clearly. We want to make our expectations known, to expedite understanding, but we know that words have their limits. When I say “chair,” you may picture a dining chair while I was thinking of a throne! When you say “retirement”… well, see where I’m going with this?

It happens in the financial news, too. Pundits think they can get into the minds of investors, to read each decision as if it were the same as an inner monologue. If anyone could read minds, though, wouldn’t a lot of people be right a little more often?

Instead, we like to remember our limits. How many resentments, how much confusion could be eased if we turned to the important people in our lives and said, “Oops! Forgot… You can’t read my mind.”

We believe an important ground rule for our work is that we will not treat each other as if we’re all mind-readers.

Clients, fair enough? With this in mind, please reach out when you’ve got anything worth mentioning—and we’ll do our best to check our understanding, together.


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Life Is Short… Pick What’s Precious

photo shows a winding path through brush on a causeway

Decades ago, my father told me something about perspective. He said, “The mortality rate is 100%.” It was a lesson, one which gave me a better understanding of his terminal illness. But the more lasting perspective is the one it gave me on life, a lesson that reminds me how precious—and short—life is.

We got into a discussion recently with a person who is close to retiring from an active career. After getting a sense for what life in retirement might look like for them, our talks focused on money and numbers.

After it became evident that this whole retirement thing could work out, anxiety about the change began to build.

When we spend four or five decades earning a paycheck, having them every month for several hundred months in a row, it is sort of jarring to step into the unknown—to live without the steady comfort of that paycheck coming in. Some uneasiness is understandable.

It is one thing to understand the concept of owning the orchard for the fruit crop—living off your portfolio—but it is a whole different thing to trust that concept with your wellbeing and way of life.

Yet if we never make that leap of faith, we might labor at a job forever, even one that drains us, even when our means actually exceed our needs.

And we can’t think or logic our way out of facing our feelings. (If we could, many of us would’ve already flexed our smarts and sidestepped these pesky feelings, right?)

So perhaps it is useful to try to finish this sentence: “Life is short, we better __.”

The fact is, time is what life is made of. Another day spent as an employee is one not spent on our own, personal priorities. When we fill in the blank, we are defining those priorities.

Clients, if you would like to talk about how you would fill in the blank, or finance it, please email us or call.


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Three Rocks

photo shows river rocks on the ground

I have a yard now that was sadly neglected for years. My ambitions for it are modest. I still cut the grass with a checkbook, but I myself am working in fits and starts to reshape it into something better.

With many trades facing supply disruptions, price spikes, and labor shortages, it seems prudent to defer some projects until things loosen up. So… I have not called in the landscaping company yet.

In the meantime, there is a space that would benefit from a layer of rock. On my daily walk, I am picking one up and bringing it home. Three days into this plan, there are three rocks. They weigh about a pound all together.

The internet suggests I might need a ton of rock for this area—2,000 pounds. If I maintain the current rate of rock accumulation for, say, 300 days per year, it would take me 20 years to get a ton of rock. Twenty years to cover what I need.

I’m struck by three things: how insignificant three rocks seem against the total need, how simple arithmetic shows it could be accomplished over time, and how similar this all is to the challenge of saving money for retirement.

The first month’s deposit in a long-term investing plan might be a tiny fraction of 1% of the eventual sum accumulated over 20 or 30 years. It might feel like three rocks compared to a whole ton!

But simple arithmetic provides some hope.

Clients, if you would like to talk about your own accumulation plans—or start one with a younger relative in mind—please email us or call.


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We’re in the Orchard for the Fruit Crop

The idea of an orchard is useful in illustrating some of the basic concepts we use in investing and planning. (The metaphor is even among our greatest hits on the blog!) Orchards are long-term endeavors. The payoff from planting trees now arrives years in the future—not unlike retirement contributions.

During our working years, we tend to focus on our account balances—the value of our orchard, so to speak. But in retirement, the key factor is probably the size of the fruit crop, not the value of the orchard. We pay our bills in retirement with monthly cash flow from our accounts, not the statement value.

After all those years of watching the value of the orchard, this is a big shift in thinking. In our working years, the fruit of the orchard goes to plant more trees. When we retire, it is okay to live on the fruit crop.

Further, if we are living on the fruit crop, it doesn’t matter what the neighbor would pay for the orchard, or if the latest offer is higher or lower than the one before. The orchard is not for sale. This is the same way an investment portfolio works. Regular cash flow can come out, even as statement values go up and down.

We were reminded of this story recently, in working with retired clients who are considering a change in lifestyle. Their idea will take a lump sum of capital, plus an increase to their monthly expenses. They wondered whether their financial security would be impaired by the outlays.

The answer for them: the size of the remaining orchard should easily provide a fruit crop large enough to meet expenses. And in retirement, there is no compelling reason to plant more trees every year, to continually reinvest the fruit crop. It is okay to live on the fruit crop—and leave the orchard for the kids.

Clients, if you would like to talk about your orchard, please email us or call.


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We're in the Orchard for the Fruit Crop 228Main.com Presents: The Best of Leibman Financial Services

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

Keeping Up with the Joneses’ Retirement Plan

photo shows person looking at watch and holding coffee

Half our staff here at 228Main.com is under 40 years of age, and as you may realize, I’m… not 40.  

And I plan to work to 92.  

Suffice to say, my “retirement” plan won’t be the right model for everyone. But that doesn’t mean these younger staffers—and many clients their age—aren’t working on their own plans and planning. 

A client’s age or generation matter to a certain extent in our line of work. What we’ve noticed, however, is that the most important part is how each person relates to their age.

Think about my goals again. Of course my age is a factor in my planning, but my intention to continue working changes things more. If I were only working for 2 more years, my strategy would require a totally different gear than my plan to earn an income for 20 more years! 

Clients, I don’t mean to suggest you need to know your retirement date now—or even have an exact vision of your retirement lifestyle. In fact, what I want to suggest is that it’s okay if it feels like you’re saving for a fuzzy future self. 

“But how do I know whether I’m track? I should’ve started years ago, right?” We’ve heard this before.  

No guarantees, but if you’ve made it into a conversation where you’re asking someone you trust this question, you’re on your way. From here, it’s about working toward your goals. How your parents retired, how the plan goes in a chart in a pamphlet that gets stuffed into your hand… if you compare your plan to those examples, they can add more anxiety than applicability. 

Reframe. Retirement planning is about your goals, your timeline, your lifestyle. No external marker. 

Feeling behind? Arianna Huffington calls this sense of a ticking clock being in a “time famine,” a state where “your feeling is that it must be later than you think it is.” Feeling starved for time to do what you need to do is no foundation for a strong plan. 

“Yeah but how will I…” 

Ooh, good question! That’s where we come in, and we’d be honored to help you shape this vision. Reach out when you’re ready. 


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