Moving Elsewhere to Achieve A Goal

Doing a financial plan is essentially a game of sums. Crunch the data, and estimations of time and returns, and you get a suggested path for achieving your desired outcome. However, the answers produced may not be those that you really want to hear.

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Anyone expecting a child, for instance, may not wish to learn that it will take another few years to qualify for a home loan, based on current market prices and rates of taxation and saving. The same disappointment can be seen for aspiring retirees, when told they would need to delay retirement plans to achieve the income they will need to finally retire.

Californians face special challenges in achieving life hurdles, because of the higher cost of real estate and taxation here than in many other states. Meanwhile, in many adjacent states, young couples can purchase an entry level condo or home in a desirable area for as little as $190,000, and pay a fraction of the property taxes they might pay for a real estate purchase in California. Aspiring real estate investors can pick up such property outside California’s borders and go net positive on their income streams, potentially, in a shorter period of time.

Retirees have fewer job constraints than young working couples, so often can find even better deals in real estate, should they opt to relocate out of state. To really know what decision is best for you, you will need to carefully compare the cost of living in your current versus desired community, as well as income levels, if your career is a consideration.

Retirees will also want to consider the cost and availability of health care comparing the communities on their target list to their current costs in Marin County. Some of this data may be readily available; other data will require your sleuthing and research.

Here are quick tips for people considering relocation for any reason, to create a financial scenario that actually maps how to make the decision, whether to move. The cost to move is not insignificant, so your groundwork is important, to minimize these costs.

  • Choose your top three reasons for moving, as these will be your criteria for comparing which community may offer you more of what you want, within your time horizon.
  • Whatever the criteria, at least two of the three should factor in a tangible economic benefit.
  • Do some online research to narrow down choices of communities to consider before planning a visit to evaluate.
  • Plan a trip. You will need your feet on the ground to test your assumptions and to minimize your costs for actually making a move.
  • Do the hard math, compare your options, and make a decision. Figure out the go/no go threshold for yourself. Perhaps it is a savings of 20 percent or more over current living costs; perhaps it is a change of pace in daily life. Consider all aspects, such as differences in property taxes, utility bills, cost of living, and salary levels. Young families will also want to consider the quality of schools available for the children.

In working with clients over the last few months I have discovered remarkable comparisons, which I will present here. For instance, living costs in San Rafael are rated at 167 to 244 as compared to the national median for the cost of living. That is, average daily costs are 67 to 124 percent higher here than the average for all other states. (See footnote). Lower cost communities out of state often compare much more favorably for the cost of housing, but average household incomes tend to be lower as well. Communities I considered for this analysis included Sparks and Las Vegas, Nevada; Tempe, Arizona, Boise, Idaho, Medford, Oregon; and Fort Collins, Colorado.

In this group of towns, the lowest cost for real estate was for homes and townhouses in Las Vegas , Nevada, where the cost of living index is 97.5 out of 100, and the median home price is less than $200,000. (see, and, for this information). The lowest cost of living for towns in this group turned out to be found in Boise, Idaho, rated 92.5 on a scale of 100. When looking at personal finance ratios, housing costs should occupy no more than 28 percent of a healthy household budget. Housing costs include mortgage payments and interest, property taxes and insurance. (See:

There are many factors that can be considered in a financial planning analysis of which housing costs are just one. However, for many Americans, the desire to own their own housing and to reap the tax advantages for doing so is paramount to building family wealth. Housing costs should be an important consideration when restaging your life anywhere. Real estate investors of course choosing property out of state would also need to examine costs for professional property management.

This article is meant to inform and education, not to provide prescriptive personal advice.

Please consult with the appropriate professional about your own situation before acting upon any ideas presented here.


*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Put Your Wishes in Writing

With the onset of summer comes sultry days when laziness may prompt a wish to stay indoors on a hot afternoon.  Evenings, of course, usually bring fresh breezes and the promise of overnight coolness. The pleasant twilight is a good time to reflect.  If you have a house full of treasures, either sentimental or of collectible value, you may wish to use some of this time to preserve family peace for the generation that inherits.

As a financial planner, I often write about the need for written wills and trusts, and many people with whom I work agree that this is important.  But the conversation ends and the thought is forgotten for another year, and another conversation.


I will write about this again as a reminder because again, despite the best laid plans, another client doesn’t understand what powers his trust documents may or may not grant.  Any client paying an attorney to draft a will or trust should verify that the document actually accomplishes precisely his or her wishes. Sometimes the generic language used in such documents falls short of providing this specific instruction.
Take an example.  As an investments manager, I do have some clients who prefer to allow another individual, usually a spouse, to make decisions for them on their behalf with regard to their accounts.  When a client makes this request, we document the exact powers the client is allowing the other person to have.  This could be a certification of trust document itemizing the exact powers of any trustee.  Such a document details for instance whether the trustee will have the ability to take margin loans against the account, trade options derivatives like puts and calls, or authorize transfers of cash out of the account to other accounts elsewhere. There are many more more specific instructions on this form that I may or may not be found in an actual trust.  However the trust document that grants powers of a trustee or of a successor trustee could indeed list these specific powers there. Separately, a trading authorization form might be warranted if the account owner wishes to grant all or limited powers of his or her account to someone else, and either there is no trust or the trust permits the owner to take this action. This trading authorization document may or may not itemize each of the actual powers granted.


A successor trustee in a trust can assume his or her role while the original trustee, the grantor, is still alive, in the event of mental incapacity. So it is important that the scope and range of powers be detailed enough to allow financial representatives the confidence to know that decisions are being made in the best interest of the client.


On a related topic, many wills and trusts summarize broadly that named individuals will assume disposition of the contents of the grantor’s house.  However, when some of the assets to be divided among heirs include one of a kind or collectible objects, or sentimental keepsakes, then the lack of specificity can spark family feuds that can pull people apart.


The keepsakes in the photo above date from the Pioneer era, and include a well thumbed family bible, dice, coins, a pocket watch, a cigar cutter, and a folding knife.  They provide an insight into a mode of life long ago, and into the character of the family members who lived it.  It would be no wonder that the adult children who encounter such a keepsake would have a hard time deciding who among them should get it. A will or trust can help make this choice plain. To be blunt, the heirs concerned may spend far more on attorneys and litigation to settle the matter than the object is actually worth.


In August, I will address this issue in conversation with several other professionals at an estate planning talk in San Rafael.  We wanted to make the event fun and lively, so we chose to have it at an auction house, on the preview night for an upcoming sale. See the section below for details.


*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

This article serves to inform. Do not act upon tax or financial advice without consulting with an appropriate professional, about how these ideas apply to your own situation.  Call us for a consultation or referral.

The Role of Heart and Soul in Making Money

When funding long range goals, many people feel they must choose between their money and their values. That’s because in choosing funds and stocks, investors often assume that putting moral values first will put a drag on portfolio returns.

Ironically, with the dramatic decline of the energy sector in preceding quarters, this assumption has proven false. Returns for some of the leading ETFs and funds aimed at socially conscious investors actually exceeded common stock indexes like the S&P 500 for 2017, as an example.

Whether this outperformance may continue in the future is anyone’s guess. But, the anomaly does open the door to questions about whether investment choices made with a social conscience may indeed still make money for the investors concerned.

I will be taking on the topic of social investing at an upcoming seminar Saturday, March 24, from 10-11 a.m., at Venture Pad, 1020 B Street, San Rafael. See registration link below.

There are many criteria that can be classified as socially conscious. A short list might include environmental or green concerns, for instance, faith-based values, or beliefs about war and peace and their relation to armaments.   Some mutual funds which are not formally classified as socially conscious may indeed exclude makers of alcoholic beverages, cigarettes and tobacco products.

Funds and ETFs that are branded as socially conscious may g o further, to embrace only holdings that fit defined criteria for environmental, social justice, and employment standards.

While a company may be classified as highly rated for environmental, social and governance, many more companies are actively implementing internal strategies to align stated company principles and the company practices and ethics. Good ESG (environmental, social and governance) ratings have been linked to good performance, for these companies.

Mutual fund companies active in this space vary in their level of engagement with the companies they invest in. Some work with the companies they have chosen to help them do better.

A recent article in Forbes Link compares various fund companies (prospectuses upon request) and their offerings according to style and performance. While the article does not assess exchange traded funds, that is, index versions of ESG compliant companies, investors can and should compare these often lower cost alternatives.

To read more, click here.

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

When Your Money Manager is a Robot

robothead.jpgThey’re everywhere, automated tools that tell you how much to save, and how often, using various mutual funds that might be suitable to accomplish your goals.  However, disruptive life events or complex tax situations may require human rather than machine oversight of financial decisions.

When heading to a financial crossroads, many newbie investors head for the easy calculators found on any consumer friendly websites. Type in your income, desired savings rate, and hopeful rate of return, and get a projection of how much money you may have saved in a defined number of years.

For low risk goals this approach may be fine.  Calculators found on for instance can help you decide how much to save at any given rate of return to come up with the down payment necessary for a car payment. The calculators can even show how much you may end up paying for a car with a given set of financing terms.

A goal that is 3 to 5 years away may require less due diligence because the standard deviation of error is less pronounced and rates of return more predictable for a shorter time horizon.  This is especially true for cash investing, where you plan to use the principal and just want some modest interest on the amount saved.

When a goal is further away, such as a goal to fund a child’s college fund or to finance retirement 20 years later, then the risk of using automated tools becomes heightened. Disruptive events could complicate this analysis further. For instance, illness, or the death or divorce of a spouse may introduce new variables requiring attention.  A fully automated projection tool may not adjust for these changes. And of course the tool itself may not remind you to make adjustments in any planning assumptions, to recalibrate your investment decisions going forward. Don’t forget that you, not the machine, need to make the funding transfers to keep the plan to track.

Now don’t get me wrong. Financial planners do use software supported planning tools to make the job of forecasting investment outcomes a little easier. But the tools are just that, tools.  Keeping people on the track they have chosen for a goal is another matter.

Couples particularly have a hard time staying on the same page to realize goals over a long period. Many couples don’t like to discuss finances and keep information about their retirement plan balances and investment choices as private matters.  Worse yet, spouses neglect to share passwords to their various online accounts. If one spouse is no longer able to access an account, due to forgetfulness or illness, the other spouse may not realize that valuable data or account information is no longer being communicated.

Automated tools and accounts can be a godsend until such a lockout occurs. Many spouses assume that banks or other online providers will provide access to their spouse’s account information upon proof of death. This may not be the case.  Entitlements for account access can be shared and passwords communicated, or not. If they are not shared, the surviving spouse may not be able to access information for an online only account until an attorney writes a letter on his or her behalf.

During tax season, this problem can be quite troublesome if 1099 reports, for instance, are sent only by email or online.  The inability of one spouse to access the online account due to loss of memory, illness, or death, may cause the other spouse great inconvenience and possibly late penalties for a tax filing.

Some of the online advice websites will aggregate access to credit card, banking, and brokerage accounts as well as reporting for a 401K or other employer plan.  The concentration of information can place the user at risk for identity theft if the website is hacked. Use of such an aggregation site, coupled with online only access to the various interconnected accounts, makes  estate settlement more difficult in the event of untimely death if no passwords are left for the spouse, or executor or successor trustee to use.


–online advice can provide useful advice to the small balance investor who wants to get pointed in the right direction.

–using an online site may establish a discipline of financial monitoring that can carry over to budget and plan for longer periods of time.

–regular visits to such as website may heighten awareness of the need to save, along with the choices that go along with investments.

–risk tolerance conversations about marital assets like employer matched 401K plans might be prompted if couples share responsibility in the monitoring.


–The websites won’t know about life changes unless the user, you, revises the starting data.

–The websites may not remind clients, you,  of the need to update starting assumptions, beneficiary information, and savings rates as tax brackets, life relationships and salary compensation change.

–The websites cannot factor in assumptions around complex tax reporting that may affect your investment decisions. 

–The websites are usually limited to assumptions based on mutual fund and ETF investing, rather than actual stocks, bonds, insurance products, or closed end funds.  They also do not consider how to best manage real estate or tax situations arising from its disposition.

–The websites alone cannot weigh the relative importance to each client of the various measures of risk, including liquidity risk, security risk, inflation risk, or market risk as measured by volatility.

Not sure which way to go? All the more reason to check in with a professional.  Someone who knows your situation will be more proactive in calibrating your investments to stay on the right track, no matter changes in circumstances.

A certified financial planner such as myself is held to a fiduciary standard when deciding upon the best recommendations for each client, after consideration of immediate as well as contingent factors. These can include assumptions about family security, or continued family income under a variety of circumstances.  Tax and legal professionals can also be useful in advising you about the tax consequences of various types of investing alternatives, or the proper titling in which to hold assets. Even beneficiary designations for account can create tax and legal headaches. Careful updating and review is always necessary.

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Predictable income from corporate securities

stackedcoinsPortfolios are like cows, we must learn to milk them for yield……

During an accumulation phase of building resources for retirement, many investors overweight on stocks and stock funds, rather than bonds, looking for growth rather than current income.  Investors transitioning into retirement need to take a hard look at income, as well as capital preservation, that is, preserving hard earned capital that may not easily be replaced.

coins1. Definitions

While there are many types of bonds, corporate bonds and securities particularly should be considered to help provide predictable income for financing retirement. Investment grade corporate bonds typically have less standard deviation, that is, less variance in their valuations during a holding period, than do stocks.  They typically pay interest twice yearly at a stated coupon rate. If longer maturities, 15 years or more, are selected, coupons for investment grade bonds can exceed 4%.

Bonds are rated for credit quality by ratings agencies, including Standard & Poors, Moodys, and Fitch.  Advisors work with their clients to help them understand what these ratings mean in judging how the bonds may perform over time.

While bond funds and ETFs are another investment option, the dividends paid from these instruments may not approach those paid by actual bonds. A careful review of the choices available is prudent, when planning for the annual income necessary to finance household budgets.  

To read more, click here.  Securing predictable income

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

This information is not intended to be individualized investment advice, nor is it a solicitation to buy or sell any securities. Always consult a qualified financial professional before investing.  Securities involve risk and are not FDIC insured, bank guaranteed, and may lose money.


The cost of living in the SF Bay Area is up to 53% higher than the average for the US.

18Budget-challenged? In Marin, you may need to cut back on other expenses to finance your cost of housing. 

It’s not your imagination. Every items often do cost more here, and it pays to shop around. Especially if your housing cost is typical, that is, exceeding national cost of living averages by as much as by 50%.

Syndicated newspaper columnists publishing personal finance columns often advise would-be savers to cut back on various categories of purchases, to accumulate money for goals.

What makes interesting reading, to glean useful advice for your own situation, is to discern how  the amounts spent on various monthly budget line items compare to your actual costs here in California, north of San Francisco.

The cost of living index for San Francisco is about 53% higher than the US average.  Oakland is judged to be 45% higher, and Sacramento is estimated to be 12% higher. Higher housing costs explain much of this spread.

For people trying to manage their finances, issues arise when higher costs for one category force elimination of or reduced expenditures in another category. As an example, a recent article in theWall Street Journal focused on budget- challenged estimated local housing cost in North Carolina for a family of 3 to be $1,300.  The rental of a two bedroom apartment in Marin County possibly accommodating a family of three, by comparison, would run $2,500 a month or more.

The 30-something couple discussed in the Journal article were grossing $140K a year but have not been able to save for a house because of their rate of pay down of outstanding student loans. Additionally, the spouses are making healthy deferrals into their 401K plans. The same couple here would have may not be able to afford the higher retirement savings rate, if the couple was also paying for higher rental costs and wished to simultaneously accumulate a house down payment.

If the situation were flipped, the situation can become net positive in a big way for a couple already accustomed to frugal living. That is if a Marin couple relocated from here to North Carolina and already was accommodating higher housing costs, this couple might suddenly feel  liberated in their new state. The transplants would have extra disposable income and could splurge on a some luxuries, for a change.

These disparities in lifestyle spending draw focus to the impact on budgeting. Creating a budget is work, a hard but necessary task to sustain a family for eventual and continuing prosperity. The challenge in creating these financial documents is to learn one’s own spending habits, to discover what costs may be out of whack relative to one’s home town or county, and what changes may be needed to make to bring costs back into line. The alternative is to live paycheck to paycheck with next to nothing in cash reserves or savings, which is a dance with chance, and a dangerous one.

With housing occupying such a big part of many local budgets, other categories of spend effectively may need to be crimped, or foregone. The question is which, and how much to trim or eliminate.

I advise my clients to acquire some perspective on these issues by comparing their own costs against those typical for their cities or states. Anyone interested can check out the various websites publishing cost of living indexes by city and state. Being knowledgeable about cost of living figures may also make folks more effective in negotiating increases in salaries to cover their living cost – or make them more aware of the need to move on to a better paying job.

Following is a listing of the more useful cost of living index websites that I have found, and use, in my financial planning practice:

Getting back to the couple that I described from North Carolina, some of the more obvious areas for the spouses to cut back centered on car payments – $468 monthly, as well as ongoing spending on dining out – $400 monthly.  Additionally, the spouses were spending on monthly vet and grooming bills for the family dog, at the rate of $200 a month. Cutting back on child care costs – $750 monthly – doesn’t seem to be an option for them.  Both spouses work.

These spending rates are not unusual.  Some Marin couples reviewing their monthly costs with me have indicated they are spending $500 or more for pet grooming monthly. The area of pet expense seems like a red flag for anyone to examine. If taking care of Fido means charging this or other expenses on cards at 18 percent yearly interest, the expense is not justifiable or sustainable.

High rates of interest on monthly credit card payments impose an ongoing strain on relationships, not to mention monthly savings.  People who carry a balance should shop around for the lowest interest rate. Many zero interest balance transfer programs can be found at   Getting the balance down may mean resorting to the cookie jar method of budgeting, to bring awareness to the actual costs of the monthly food shopping bill. The cookie jar method entails putting a given sum into the kitchen cookie jar. Food purchases are made from this sum until it is gone.  The discipline is to balance and pace food spending with the amount of money actually still in the jar.

More preferable are the decisions resulting in’ big wins.’ The ‘one and done.’  Accomplishing savings goals requires analysis and foresight. Comparison shopping or lifestyle changes may be in order to ensure that any couple so desiring can put some green into their own accounts before they hand the rest over to the companies whose products and services support their lifestyle.

Deciding upon a percentage or amount to save monthly should derive from the goals that a couple sets. The choices of how long to work and when to retire, for instance, are accompanied by the realities of saving to finance this long term goal.  Returns on investments play a part in determining how much must be accumulated over any specified period of time. Having a reality check discussion with a financial advisor can ensure that anyone, including you, are saving enough for the timeline you have in mind. I am happy to help.

To figure out how to save, click here.

If you find yourself needing guidance about budgets and spending, or appropriate investments to grow your green, give me a call. See my website at for useful self-help spreadsheets.
*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Thinking Ahead, Why You Need a Trust

Recently I had the pleasure of participating in a panel discussion on the subject of Social Security and retirement. Joining me in this discussion were a local estate planning attorney, Heather Robertson, and a senior care benefits expert, Rosanne Angel.

As a financial planner, I thought I knew almost everything one in my profession needs to know about trusts.  But I learned something new, that I want to share. Something very important.

When planning for what happens to assets after one’s death, most people think they are clear of the estate tax, because the threshold before taxes apply is so high. But many people don’t think of the probate fee charged under state law by probate attorneys, or the fees for executors. And even if people know about attorney probate fees, which can amount to tens of thousands of dollars even for a modest estate, they may not realize that the probate fee applies to the full value of the homes they own. Not just to the equity portion.

In other words, probate fees will also apply to the debt still owed on the house, not just the part you own.

The only workaround on this is to place the house along with other assets in a trust, your trust, so that upon your death the house avoids probate proceedings. And all the costs associated with this.

Heather was kind enough to also talk to other key points of trusts. Parents of minor children of course will want to name guardians for their children, so that a court is not left to decide who gets the children should the parents die in a traffic accident. Or suffer another form of untimely death.

Parents of disabled children will probably need a trust to protect assets for the adult child, under Social Security rules. When protecting people who lack mental capacity, it is important to choose a reliable licensed fiduciary.  These are people licensed in the state of California or other jurisdictions who are professionals in managing assets and tax filings for the benefit of someone else.

Unmarried couples may wish a trust to provide for a division of assets upon death without entering into a marital contract.  Trusts can serve in this role to fulfill promises made by the partners to each other. For instance, unmarried couples may wish to gift equity in a house or reimburse debts related to health care or other needs, by providing for this in their bequests made in the trust. Where trusts fall short when compared to marriage is in providing tax and Social Security advantages permitted under federal tax code and under the rules of the Social Security Administration.

Finally, should one of you in a marriage not have long term health insurance or other savings to cover health events, a trust can serve to reimburse the spouse or partner who may have to pay for the care of the other.  This type of assurance is even more important for marriages later in life, should both parties have adult children who hope to inherit.

None of us like to contemplate death. But having a trust can help others manage their grief. Heather said the last thing families want to do after losing a love one is to petition the court for a distribution of assets. The trust can help avoid the necessity of  court approvals.

This said, give an original copy of the trust to your successor trustee to execute the estate. Make sure your executor and survivors know where it is. If you are creating a will, still subject to probate, your executor will absolutely need an original of the will, not just a copy. Also, create a HIPAA document and possibly a durable power of attorney which can be activated when appropriate, should you take ill and need to rely on others for decisions.

This blog is educational in purpose only.  Check with an attorney when establishing a will or trust for yourself or your family.

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Use Tax Mapping to Trim Taxes in Retirement

taxes86Preparing for retirement isn’t just about accumulating enough savings. It’s critical to consider your overall tax picture as well. You can’t always assume that you’ll have a lower tax rate in retirement — especially if most of your funds come from a 401(k), traditional IRA or other taxable income sources.


To help you keep more of your income in retirement, I’m proposing a strategy called “tax mapping.” This can involve shifting some beaten-down assets from tax-deferred status to tax-exempt status or, more generally, redirecting investments into tax-favored categories before retirement.

Shift to a Roth IRA

One easy way to tax map is to convert holdings from a traditional IRA or a 401(k) into a Roth IRA. This involves being taxed on the early withdrawal of your IRA or 401(k) funds, but it means you won’t pay taxes when receiving your Roth IRA distributions in retirement — provided you hold the account for the minimum five years and comply with other IRS requirements.

The advantage of making this shift now, when the market is down, is that you’ll be taxed on the reduced value of your IRA or 401(k)assets. The funds will then grow tax-free, and you won’t have to pay taxes in retirement on the presumably higher value of your Roth IRA.

This type of tax mapping requires you to predict what will happen to the value of your assets, and whether the gains and tax-free income are likely to outweigh the price you pay to shift the assets.

Because of that, the best asset for this remap might be a growth stock, such as Amazon, that could be valued at less than what you paid. This means that you’ll pay less tax to shift it now than you would have when the stock traded at a higher valuation — but the price might be expected to reinflate later.

You can shift a stock or asset using a conversion form available from your brokerage company. If you’re concerned about how the temporary increase in income could affect your taxes in the short term, consider making higher pre-tax contributions to your retirement plans or prepaying state and local property taxes due in the following year.

Explore other types of assets

Roth IRAs aren’t the only way to reduce the amount of tax you’ll pay in retirement.

It may make sense to shift some capital from a taxable account, which holds stocks or a mutual fund, to a tax-favored account, such as an annuity. You might also trade highly taxed corporate bonds for tax-free municipal bonds or dividend-paying stocks, since the dividend rate of tax is lower than the income tax rate.

Tradeoffs may arise if you have to sell assets and pay capital gains taxes today to free up the cash to move into another type of investment. But keep in mind that having a Roth IRA or municipal bonds can affect whether your Social Security distributions — likely an important part of your retirement income — are taxed. If your taxable, non-Social Security income exceeds certain thresholds, up to 85% of your Social Security benefit may be subject to income tax.

Next steps

The current market volatility is an opportunity to reboot your retirement accumulation strategies. Use these tax-mapping moves as part of a long-range plan to reduce taxes in retirement by holding assets in the most tax-efficient ways possible. And always consult with a tax expert before making major changes. Otherwise, you may run into some unexpected “gotchas” from the IRS.

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Putting Your Money to Work for the Greater Good


It’s the giving season again, a time when many investors explore whether their investments can also grow for the greater good. If you’re thinking about how to nurture your nest egg and further your desire to do good, you may want to consider certain types of investments and strategies.

Here are two basic methods for putting your money to work in ways that benefit the world: tailoring your investments to match your beliefs and using tax-friendly charitable giving strategies.

Socially responsible investing

Investing that takes into account both financial returns and social impact is known as socially responsible investing. Other monikers might also be used, such as sustainable and responsible investing, green investing or socially conscious investing. Generally speaking, the idea is to make a positive difference in the world by directing capital into socially beneficial areas of the economy. Depending on your own beliefs and values, you may favor investments that focus on protecting the environment, for example, or that consider fair-trade practices a requirement for investing. Still other investments may be guided by religious values.

Applying criteria based on such social goals, investors can put their money to work in a variety of ways. Some may prefer to buy individual stocks and bonds for these types of investments. For example, they may choose to invest in companies that donate a large amount of cash or a percentage of their profits to the community or to charities. Or investors may prefer to buy municipal bonds to build or maintain schools, thus supporting educational goals. Other investors may want more diversification, focusing on the dozens of publicly traded mutual funds that ascribe to various principles to filter investments, rather than looking exclusively at performance.

Whatever the criteria, the performance of the underlying investments can and should still be considered. Socially responsible mutual funds have largely performed well this year, according to Bloomberg’s ranking of sustainable and responsible funds. But beyond performance and social impact, you must also consider the tax consequences and how these investments fit into your overall portfolio and strategy. For instance, holding a mutual fund may mean you will experience taxable distributions of capital gains when positions are traded within the fund, so keep this in mind when choosing a fund over an individual stock or exchange-traded fund.

Tax-friendly tools for giving


Investors in higher tax brackets may wish to mix their objectives of lowering their tax bills and investing for good through the use of a donor-advised fund. When you donate to such funds, you receive a tax deduction, your investment grows tax-free and the investment income can be distributed to nonprofit organizations or charities per your recommendations. These funds can also be set up with screening criteria for the investments used in the portfolio.

Community foundations, which are larger nonprofits that manage endowment accounts for multiple charities in their region, offer a turn-key way to do this type of giving, usually with low or no minimums for the initial gifts. Donors direct their investments to specific types of funds offered by the foundation (for example, scholarship funds). These investments cannot benefit the donor or any private interest, and periodic distributions must benefit 501 (c)(3) nonprofit entities only.


If the donor wants to choose other investments, another option to explore is the creation of a trust. Depending on what type of trustis created, the principal would remain under control of the donors or be released under the terms of the trust. If the legacy or income stream planned is substantial, then it may make sense to work with an estate-planning attorney to set up a charitable lead or remainder trust. Both are irrevocable trusts, meaning the grantor cannot change the provisions once the trust is created.

With a charitable lead trust, the income from the invested capital is earmarked to go to a nonprofit in exchange for a tax write-off. This arrangement expires after a period of time when the control of assets reverts back to the donor or the donor’s estate. With a charitable remainder trust, the principal may be invested for the benefit of a living person or persons, but upon the death of the donor or after a defined period of time, the invested principal passes as a gift to a designated charity. Gifting monies to such trusts results in a tax break, subject to specific Internal Revenue Service formulas. A qualified tax expert and an attorney should be consulted in setting up these types of accounts.


Finally, donors wishing to have substantial control over investments and gifts may consider a family foundation. However, this form of giving may also be the most expensive, as private foundations necessitate the creation of a nonprofit entity, which must follow complex rules, pay excise taxes on investment income and provide yearly tax reporting to the IRS. Donors opting for this form usually prefer to set up a private, nonoperating foundation that makes gifts to other 501 (c)(3) charities rather than providing actual services. Qualified attorneys or tax experts can help navigate tax rules dictating how these foundations are to be created and managed. They can also advise donors on the resulting tax breaks available for the initial and ongoing contributions to fund the private foundation’s gifts and activities.

Givers gain

Whether it’s through socially responsible investments or tax-friendly donation vehicles, there are several ways to put your capital to work for the social and charitable causes you seek to support. As you get into the giving spirit this year, make sure you take a deeper look at the ways your money can make a difference in the world, while facilitating smart financial moves that support your personal goals. Talk to an advisor to help make the most of your contributions.

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Net Losses with Gains to Reduce Your Tax Bill for 2015

As you prepare for a week of thanks with you and yours, don’t forget your portfolio gains. By realizing a few losses before Dec. 31, you may substantially reduce taxes on this year’s return.

Don’t miss an opportunity to recalibrate your portfolio.

As you review the year to date performance of your taxable portfolios, have you noticed any accumulated gains that may be wise to take? And be thankful to cash in while you can?

Often we miss out on the gratitude of taking a gain while we can….only to then be left with a sorrier choice to take a loss later, if the position no longer fits with an investing strategy.

In a volatile year such as 2015, there may be fewer large gains waiting to be taken in your portfolio accounts. However, in taxable accounts of long standing, often there are positions that compound upon themselves over a number of years. People who have hesitated to sell because of the gains taxes otherwise due may reconsider in light of expectations for 2016.

When deciding whether now is the time to sell some of the longer held or overgrown gains positions, check in with yourself about your investment strategy for the account concerned. Are the stocks still a good fit for your goals? Do they pay income, if income is one of your objectives?

While no financial advisor has a crystal ball, there are trends becoming apparent through clues in futures markets that portend continued weakness in some industry sectors, and more robust performance in others. If some of the larger positons that you hold are in the trouble spots, it may be prudent to reallocate and recalibrate for more performance success next year. This year’s winners may be next year’s losers, as a review of market performance “quilt charts” often shows.

Learn more.

Follow the IRS rules to get full credit.

Keep in mind the IRS rules for netting short term gains with short term losses, and long term gains with long term losses, and then finally the two results. Do the math, and review the results, to see what tax impact if any you may face. If you plan any sales these must be done before December 31st to count for this tax year.


  • Net short term gains against short term losses
  • Net long term gains against long term losses
  • Keep these results separate to report on Schedule D of the 1040, if results for both time periods fall into the same category, that is, both gains, or both losses.
  • If the results for the time period differ, so that one holding period results in a gain and the other in a loss, then the results would be netted with each other
  • If the capital losses exceed capital gains, up to $3000 can be deducted against ordinary income in any one tax year.
  • You are able to carry forward any unused capital losses indefinitely to future years. Each year, unused capital losses should be applied first in the netting process against the current year’s capital gains. You would then take the $3000 deduction against ordinary income.

Avoid the wash sale trap.

Wash sale rules
  • Any stock sold then bought back within 30 days of the original sale may present a problem for taking the loss. A sale followed by a purchase in this manner is called a wash sale.

Adjust for risk tolerance.

A review of your holdings is a good time to allow yourself to check on your relative risk tolerance. One website, managed by the American Association of Individual Investors (, allows you to self diagnose your risk tolerance using factors such as age, time horizon, and maximum loss tolerance. Keep in mind that even a moderate portfolio can lose as much as 20% in a bad year; a conservative portfolio can lose as much as 15%. In 2008 these numbers were even higher as the losses exceeded one standard deviation range from the historical norms. For categories such as small cap stocks or international, loss figures and volatility can be higher.

Interestingly, standard deviation is a risk measure often little understood by individual investors. A conservative portfolio, that is, one comprising 50% in bonds and cash, might have an average standard deviation of 5.5%, according to the AAII. That is, portfolio results may exceed or lag the norm by as much as 5.5% within one standard deviation of historic results.

When deciding whether to take some gains and losses this year, consult with your tax professionals regarding tax consequences and long term implications for yield and growth. You should know your capital gains tax rate before making any decision to incur taxes upon sale.

You should also know what your expected rate of return and yield are for the portfolios concerned. These numbers should be used in your financial planning to determine what rate of contribution you will need to reach your retirement milestones. Or what rate of withdrawal can be tolerated to slow the rate of attrition of principal, once you begin withdrawals.
*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.