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Key Tax Rates & What Changes in 2017

Key Tax Rates & What Changes in 2017

As the year ends and a new year begins, our thoughts turn to 2017. Every year tax rates can change, IRA contributions may adjust, and long term care premiums count more or less against your taxable income. And sometimes nothing changes. 

That’s why it’s good to review things once a year. 

This year we prepared a simple 2-page PDF document that covers the important financial data for 2017 – especially for tax purposes. We should mention President-Elect Trump has promised to revise the tax code so these numbers may change sometime in 2017. But it’s the best information available at the end of this year.  

According to Motley Fool, there are some notable changes to the tax code next year…  

  • Tax brackets have been adjusted for inflation.
  • Standard deductions have increased slightly – up $50 for individuals, up $100 for couples.
  • Traditional and Roth IRA phase-outs will be adjusted higher.
  • Medical expense deductions will change for certain seniors.
  • The estate tax exemption will increase by $40,000 from 2016 levels. 

Checkout the complete checklist of financial data and tax info for 2017 below. We hope you find it helpful for your tax planning next year.

DOWNLOAD: Key Financial Data – 2017 (1.3 MB)

And if you have any questions, we’re only a phone call away. 

Wishing you a prosperous and happy 2017!  

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Eye on Money: Charitable Trusts

Eye on Money: Charitable Trusts

The January/February 2017 Eye On Money is now available on RepublicWealthAdvisors.com, featuring stories on:

  • Charitable Trusts: Learn about 2 trusts that can help you support your favorite charity
  • 10 Things to Do with a Bonus or Other Windfall
  • Navigating Volatility in the Stock Market
  • The SIMPLE IRA: A Simple Solution for Your Retirement Plan Needs
  • Portability: Preserving Your Spouce's Unused Estate Tax Exclusion
  • Sydney, Australia: City of Sunshine

DOWNLOAD PDF (1.3 MB)

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

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Four Ways to Donate to Charities in 2016

Four Ways to Donate to Charities in 2016

This month, we’ve been focusing on ways to give in 2016. December 31st is the last day you can donate to a charity and receive a credit for 2016 income taxes. There are several ways to donate this month. We’ve put together a short list to help you think about your next charity donation. 

1. Cash Donations

One of the most common ways to donate to any charity is through cash. Though ‘cash’ often refers to money in hand (quarters, hundred dollar bills, etc.), the term can refer to money in banking accounts, checks or any other form of currency that is easily accessible and can be quickly turned into physical cash. This year, you can donate cash through checks, bill pay, or direct transfers to help causes you believe in. 

2. Donor-Advised Funds (DAFs)

Last week, we reviewed another way to give this year: the donor-advised fund, or DAF. The donor-advised fund allows you to make tax qualified contributions today and decide later how the funds can be used. The core features of a donor-advised fund are irrevocable contributions, tax deductions in the current year, and future distribution of funds. It’s one way to give for a tax benefit today while giving tomorrow to your favorite charity. 

3. Qualified Charitable Distributions (QCDs)

If you’re over the age of 70½, you may be interested in giving a qualified charitable distribution (QCD). According to the IRS, a qualified charitable distribution is “an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity.” In other words, you can give funds directly from your IRA and not pay any taxes on that distribution. It may be a great way to offset taxes in your situation while giving to your favorite cause.   

4. Time

An often overlooked way to donate to a charity is with your time. You may not be able to give as much as you would like to a food bank, church, or synagogue, but many of those same organizations offer volunteer opportunities. Volunteering is one way to give back that doesn’t cost anything. One of the major benefits from giving your time can be a feeling of satisfaction after a charity event. There may not be an income tax credit for donating your time, but you can’t replicate the good vibes you often receive when you volunteer. 

Bonus Tip: Charity Navigator

Ever wonder if a charity will use the money in the best way? 

Charity Navigator may be able to help out. According to their website, Charity Navigator “has become the nation's largest and most-utilized evaluator of charities.” They attempt to create an unbiased ratings system so supporters can assess whether donations will be used appropriately. To research a charity, checkout: CharityNavigator.com 

We also recommend you discuss this and other tax-beneficial donation strategies with a qualified tax professional. If you have any other questions about donations this year, give us a call. We’re always a phone call away. 

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request. 

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Donor-Advised Funds: Give More Strategically

Donor-Advised Funds: Give More Strategically

It’s the end of the year. December is the final month to earn an itemized tax deduction for 2016 charitable contributions. There are several ways to make a philanthropic contribution including direct donations and corporate-matching donations, and today we’re going to review one charitable vehicle, the Donor-Advised Fund.  

What is a Donor-Advised Fund?

According to Fidelity Charitable, “a Donor-Advised Fund, or DAF, is a charitable giving vehicle sponsored by a public charity that allows you to make a contribution to that charity and be eligible for an immediate tax deduction, and then recommend grants over time to any IRS-qualified public charity.”


Image Credit: Fidelity Charitable

The core features of a donor-advised fund are irrevocable contributions, tax deductions in the current year, and future distribution of funds. It’s one way to give to gain a tax benefit today and give tomorrow to your favorite charity.

Giving Strategically with a Donor-Advised Fund

Most of us want to support charities we believe in, but it’s important to give strategically. A donor-advised fund is a good way to give in a smart way.

Typically, many individuals simply donate cash or a use a credit card to make a charitable contribution.  What if there is a better way to make the same donation?

In addition to cash contributions, Donor-Advised funds allow for the donation of appreciated securities.  While this can include real estate, private equity or other alternatives, for most clients, we see stocks, bonds, and mutual funds that have appreciated and have been held more than a year donated.  In addition to receiving the tax deduction for the full value of the gift, you also avoid having to pay taxes on the appreciation of the security.  This can be particularly valuable if you’ve held a security for a number of years and have a large gain which would otherwise be subject to capital gains tax when you sell it.  

Separation of Timing of Tax Deduction and Future Distribution

As mentioned above, donor-advised funds allow you to receive a tax benefit today and donate to a charity any time in the future.  This allows for tax planning strategies which we recommend you discuss with your accounting professional.

Starting a Donor-Advised Fund

There are several companies who manage donor-advised funds. Large institutions including Fidelity Charitable offer funds as well as faith-based organizations and local community foundations. All of these companies charge a management fee and funds are managed until you decide where you would like to donate. 

If you’d like to discuss how a Donor-Advised Fund may be of benefit to you, please give us a call.  We also recommend you discuss this and other tax-beneficial donation strategies with your tax professional.

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

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Harvesting Losses for Lower Taxes Next Year

Harvesting Losses for Lower Taxes Next Year

Tax loss harvesting may be a confusing topic. After all, who wants to ‘harvest  a loss’? But there’s a valid reason to do it: tax savings. 

Last year, we published five useful year-end investment tips. In that article, we explored how tax loss harvesting might be a beneficial way to save on taxes in the upcoming year. This year is no different. Planning for taxes this year can save you money when it’s time to write a check to Uncle Sam next year.  

What is ‘Tax Loss Harvesting’? 

Here’s an overview: the IRS taxes you on short-term and long-term capital gains. Tax rates are graduated depending on your annual income. Short-term capital gains are taxed at a higher rate than long-term capital gains. However, you can offset both types of gains by harvesting losses in either short-term or long-term bucket. 

For instance, if you plan to report $25,000 in short-term capital gains (less than 1 year), you can offset that gain by selling another short-term investment for a loss. If that loss equals the other investment gain, it can negate your short-term capital gains tax on the original investment. (As always, consult your CPA before making any important tax decisions.) 

Here’s a Republic spin on Fidelity’s tips for harvesting tax losses in 2016… 

1.Assess your short-term and long-term capital gains for the year.  

The first step is to determine your eligible capital gains. Short-term capital gains are those realized from investments that you have owned for one year or less. Long-term capital gains are realized on investments held longer than one year. You’ll need to know about both types of gains to know which types of losses you may want to realize this year.

2.Estimate your capital-gains tax liability.

After determining the capital gains you plan to report next year, estimate the taxes you’ll owe on both your short-term and long-term gains. Depending on your situation, short-term gains are taxed at higher rates compared to long-term gains. Check with the IRS to understand your rates for both short-term and long-term capital gains in 2016.

3.Harvest losses and prioritize your tax savings.

Next, if you have some investments that have lost money – and nearly all of us do – they will be candidates for losses. For any investment held less than 1 year, that can be a short-term loss. For any investment held longer than 1 year, that can be a long-term loss. Depending on which bucket the gains happened this year, that’s where you can prioritize where the losses should occur. At that point, you can sell the losing investment to realize a loss in the appropriate bucket.   

4.Stay diversified, but beware of wash sales.

After you sell the depreciated investments, determine new investments you should buy – if any. However, be careful with the wash-sale rule. The wash-sale rule states that your tax write-off is disallowed if you buy the same security or “substantially identical” security, within 30 days before or after the date you sold the loss-generating investment. 

5.Make tax-loss harvesting part of your year-round tax and investing strategies.

Plan to incorporate tax loss harvesting into your annual tax planning and portfolio rebalancing. In addition to keeping your portfolio aligned with your goals, a once- or twice-a-year rebalancing provides an opportunity to reexamine lagging investments that may be candidates for tax-loss harvesting.

Tax loss harvesting is just one end-of-year strategy to use to lower taxes the following year. It may not fit your particular situation. Consult with your CPA or tax advisor for the best way to plan for next year’s taxes. That way you won’t be caught off-guard next April. But act soon. You can only use this strategy for 2016 taxes if the losses are realized by December 31, 2016.  

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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7 Questions to Ask Your CPA Before Year-End

7 Questions to Ask Your CPA Before Year-End

The holidays are a busy time of year. 

As we gear up for December, it can be easy to forget about financial planning. In an effort to provide some friendly reminders, last week we reviewed ways to maximize tax advantaged savings accounts in 2016. 

This week, we continue the year-end planning theme by posting some helpful questions for your CPA. Tax season is still months away, but tax management should begin in the fall – especially for high-income earners because of the 3.8% net investment income tax, AMT, and other taxes. 

These seven questions can help you spot problem areas in your tax planning and help you better understand any services you may need this year and next.

1. Can I limit my exposure to the 3.8% Medicare surcharge tax with any strategies?

2. Can I maximize the tax break using a Flex Plan for child care costs?

3. What if my school-age child went to summer camp – any tax credit?

4. How should I handle an inherited IRA?

5. How can I optimize the earnings of my children through a Roth IRA?

6. How can I use the 0% rate on long-term gains?

7. How can I donate most efficiently through appreciated assets, annuity trusts, or non-cash donations?

Understanding tax laws isn’t easy.

Tax laws change constantly and are often tricky. Though these questions are great conversation-starters, it shouldn’t end here. Please seek the assistance of a tax professional whenever you have any questions about your tax situation.

In addition, we can help navigate some of these issues with many of our accredited or qualified wealth management clients as an added value service. On client request, our team at Republic Wealth Advisors has written permission to reach out to their tax counsel on a proactive ongoing basis to execute tax mitigation strategies on their behalf when appropriate. We have found having a relationship with our clients’ CPA and/or attorney is a helpful way to get all our clients’ advisors thinking about how we might benefit our mutual client. This can help create more harmony between all parties with an aim to improve tax implications and/or risk mitigation.

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

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Maximize Tax Advantaged Savings Accounts in 2016

The year is winding down. As you wrap-up 2016 business, it’s important to consider saving your extra earnings in a tax-advantaged way when feasible. If you spend less than you earn, there are several ways to shelter earnings from taxes. 

Starting with the most time-sensitive plans…

1. Employer Plans include a 401(k), 403(b), or 457(b) plan. Employer-sponsored plans benefit savers in two ways: for one, they are convenient way to save via your paycheck withholdings. Second, many employers offer contribution matches. If your employer offers a matching contribution, make sure you take advantage of the opportunity. It’s basically free, tax-deferred income.

In addition to receiving the company match, you get the added potential benefits of any tax-deferred growth and compounding returns.  Many employer plans now offer a Roth option which provides tax free earnings growth as Roth 401k withdrawals are not taxed. Roth IRAs are further described below, but an important difference is that a Roth 401k contribution does not have any income limitation which may otherwise prevent higher wage earners from contributing. Finally, if you are not currently maximizing a contribution to your employer sponsored plan, you’ll need to act soon as you have only until your last 2016 paycheck to make a 2016 contribution.  

2. SIMPLE IRAs and SIMPLE 401(k) plans are generally associated with small businesses. If your company offers an employer plan listed above, you will not be offered a SIMPLE. SIMPLE contributions grow tax deferred similarly to traditional IRAs which are discussed in the next section. Income taxes are owed when you make withdrawals. You can contribute up to $12,500 (for 2016) to one of these plans; individuals age 50 and older can contribute an additional $3,000 (for 2016). SIMPLE 401(k) plans can also allow Roth contributions. In order for SIMPLE IRAs and SIMPLE 401(k) plans to shelter tax deferred earnings in 2016, the account must have been established by Oct 1, 2016. However, the employee can contribute through the final paycheck or December 31, 2016 for 2016-eligible contributions.  Note: In our experience, SIMPLE IRAs and 401(k)s plans are NOT very common.

3. Traditional IRAs offer a tax deduction up front if you are eligible. Any earnings grow tax deferred, but you pay income taxes on withdrawals. If your spouse or you is not covered by a workplace plan (with exceptions for some 457 plans), you are able to take a tax deduction on traditional IRA contributions. 

If you are covered by a workplace plan in 2016, full deductibility begins to phase out at annual modified adjusted gross incomes (MAGIs) of $61,000 for singles and $98,000 for married couples filing jointly. If you're not covered by a workplace plan but your spouse is, then the phaseout begins at $184,000. The maximum contribution is $5,500 per person ($6,500 if you are age 50 or older) or 100% of employment compensation, whichever is less. The deadline for 2016-eligible contributions for traditional IRAs is April 15, 2017.

4. Roth IRAs allow you to contribute after-tax dollars if you have enough earned income and meet certain income eligibility requirements limitations. Any earnings grow tax free, and qualified withdrawals are tax free. In 2016, the max contribution for a Roth IRA is the same as traditional IRAs. But there are income requirements: Eligibility begins to phase out at annual MAGIs of $117,000 for singles and $184,000 for married couples filing jointly. The deadline for 2016-eligible contributions for Roth IRAs is April 15, 2017. Note: you may be eligible for a backdoor Roth IRA contribution which we have written about in the past here

5. SEP IRAs work in almost the exact same way as a traditional IRA from a tax standpoint but are only available to small business owners. An above the line tax deduction is received by the business for any contributions made, and distributions from the account are taxable as income. SEP IRAs afford a higher contribution limit than Traditional IRAs. For 2016, if you fund a SEP for your business, you are allowed to contribute the lesser of: 25% of your net earnings from self-employment, or $53,000.

Once the money is in the plan, you can invest it in all of the same things you would be allowed to invest in with a regular IRA (stocks, bonds, mutual funds, CDs, etc.). Also, the same withdrawal rules apply. With a few exceptions, you cannot make withdrawals from the plan prior to age 59.5 without being penalized. The deadline for 2016-eligible contributions for SEP IRAs is the extended due date of your 2016 income tax return.

Taking Action to Save Taxes in 2016 

These savings plans can be confusing. If you need more specialized guidance for which of the above may be appropriate for your individual situation, we recommend you speak to your tax professional. Keep in mind the 2016 deadline for some of these plans is December 31, 2016. So act soon.

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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A Trump Presidency Preview

A Trump Presidency Preview

The votes are now tallied.

We have a new President-Elect and a Republican-controlled Congress starting in 2017.

The thing is most voters did not expect the results we got. According to the Los Angeles Times, only 42.7% of likely voters thought Donald Trump could win the day before the election. That number never broke 46% the entire duration of the campaign. In other words, most people did not think Trump could pull it off. And they were wrong.

Who Do You Think Will Win? - Image Credit: Los Angeles Times

Last night the market couldn’t decide what to do. After trending well this week, the futures reversed course and started crashing as election results trickled in. The markets did not like a pending Trump victory. Then, after Trump’s conciliatory victory speech, the stock market futures rebounded and have fared well today. Nobody predicted the election results and the market’s volatile reaction. 

Diversification to Weather the Unexpected

But the point is not to tell you when to buy or sell stocks. 

The point is: unexpected things happen. A Brexit vote will pass when it’s not expected. Outsider candidates will beat establishment candidates. Black Swans fly in from unexpected places. These things happen in the market and in life. 

That’s why a portfolio should be designed to weather the unexpected. Diversification is critical to making it through any challenging market. For example, exposure to alternative investments and strategies is helpful because they don’t usually correlate to broader markets. And international holdings abroad can help your portfolio withstand some negative press at home. Whatever happens, a well-designed, diversified portfolio can be a good remedy for unexpected events. This is something we practice at Republic Wealth Advisors. 

Looking Ahead at a Trump Presidency: The Economy & Inflation?

We cannot predict the future. But we are aware that a Trump presidency looks different than what most people expected just one day ago. (For more details on his plan, checkout Trump’s Contract with the American Voter.)

The following are two things we are monitoring as the next few weeks unfold:

For one, the US economy is shaken but still here. The US economic horizon may not be as rosy as a few years ago, but there’s no reason to sell the farm yet. According to the Bureau of Economic Analysis, the US gross domestic product (GDP) grew a healthy 2.9% in the third quarter of 2016 compared to the previous quarter. In addition, unemployment is near the pre-recession lows at 4.9% as reported in the latest BLS figures. Though these aren’t gangbuster numbers, they do indicate a healthy economic foundation.

A newly elected President Trump is not expected to upset the US economic apple cart. His campaign promises combining pro-business, lower regulation, and tax cuts should be helpful to the long-term economic health of the country. Moreover, a Republican-controlled House and Senate will help Trump implement his plans. But anything can happen. We will monitor the situation closely.

Secondly, we expect higher inflation risks in the near term. Treasury bonds continued a sell-off and long term interest rates rose today which suggests inflation in the near term. Trump’s promises to cut taxes and of more government spending seem to indicate investors are concerned about inflation. This may also influence the Fed’s decision to raise rates in December. All of these factors affect how the markets will fare over the next few weeks and beyond. 

Moving Ahead in the Next 4 Years

We will continue to monitor everything as the next few weeks unfold. The most immediate uncertainty is behind us. The markets are more poised for a new day. At Republic Wealth Advisors, we aim to help keep you protected during uncertainly and positioned to benefit from future opportunities over the next four years and beyond.

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Seasonality Update: Entering the Historically Strongest 6 Months

Seasonality Update: Entering the Historically Strongest 6 Months

Dozens of investing strategies compete in the stock market. It’s one of the features that make a market: investors invest differently. However, some strategies have performed better than others for decades running.

You may be familiar with the adage ‘Sell in May and Go Away’ which we have discussed in many past instances and believe to be a viable investment strategy.  Seasonal investing is a strategy that seeks to capitalize on the market historically performing better from November to April in most years. 

Seasonal Stock Investing: An Overview

Seasonal stock investing has historically outperformed traditional buy-and-hold investing over time. One seasonal investing proponent is the Stock Traders’ Almanac. According to The Stock Traders Almanac

“After decades of historical research, we discovered that most market gains occur during the months November through April. Investing in the Dow Jones Industrial Average between November 1st and April 30th each year and then switching into fixed income for the other six months has produced reliable returns with reduced risk since 1950.

Thus far we have failed to find a similar trading strategy that even comes close over the past six decades. And to top it off, the strategy has only been improving since we first discovered it in 1986.”

Stock Trader's Almanac Strategy Historic Results

The Stock Trader’s Almanac: Best 6 Months Strategy – Image Courtesy of The Stock Trader’s Almanac

The numbers are pretty compelling. Starting in 1950, a hypothetical $10,000 account invested in the Dow Jones Industrial stocks would have a total return of $1,210,096 in 2015 – assuming no withdrawals. However, had you invested with the modified Best 6 Months strategy – i.e. the ‘Sell in May’ strategy – the total return would be $1,692,679 or 39.9% better! 

Of course, every year is different. Sometimes the ‘Best 6 Months’ strategy underperforms the broader market. Still, the ‘Sell in May’ strategy tends to outperform the broader market while limiting risk over time.

Republic Wealth Advisors on Seasonality

At Republic, seasonal investing is a tenant that we believe has added value for our client portfolios compared to traditional buy and hold investing.  Over the past few years, we have explored seasonal investing on this blog. As recently as last September, we discussed how selling in May helped returns in 2015. 

Republic Wealth’s strategy does not follow ‘Sell in May’ by selling exactly on May 1st.  We use other indicators to fine-tune our seasonal “buy” and “sell” signals. This year, the election is throwing a wrench at seasonality. The stock market is not showing a clear upward direction like we would normally expect on November 1. Our research and real-world experience tell us the seasonal buy signal alone isn’t enough. Instead, our approach utilizes seasonality, technical analysis, and fundamental considerations to enter and exit the market. 

As the market awaits the US election results, we are also awaiting a more clear entry signal to follow our seasonality “buy” signal for this year. When we see alignment in the signals we track, our programs which follow the seasonality trends will re-enter the stock market with more aggressive positions with an aim to “buy” the best 6 months of the year. 

We don’t know if the historically strong period from now through May of 2017 will meet historical norms or if this upcoming 6 months will be an anomaly like we saw last year.  We do know that over long periods of time, following seasonality can help put the odds in your favor. 

   

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Next Presidency May Pose Economic Headwinds

Next Presidency May Pose Economic Headwinds

The US Presidential election is less than two weeks away. We are concerned about the economic impact if either Hillary Clinton or Donald Trump wins the election.  

Although we cannot predict election results, Clinton appears to be heading towards a victory in November. In addition, she may inherit a newly elected Senate Democrat majority which would help her implement her agenda. This will likely have a financial impact on you, regardless of which side of the aisle you sit on. 

Image Credit: Real Clear Politics Electoral Map Projection for 2016 U.S. Presidential Election, 10/25/2016

If some of the campaign promises of the Clinton campaign come to fruition, we believe a Clinton Presidency could provide economic challenges in the short term. Here are three reasons why: 

1. Campaign Payback to Millennials

Hillary Clinton enjoys some of her strongest support among young voters between the ages of 18-34. In virtually every area, from terrorism to climate change, young voters support Hillary Clinton over Donald Trump according to a September Gallup poll. Clinton is beholden to these young voters if she expects to be reelected in another 4 years. That’s why she will push for a $15/hour Federal Minimum Wage and a College Affordability Plan to spend $35 billion/year to refinance student debt and pay states to guarantee tuition.

These programs, while helpful to the underemployed college graduate, don’t help taxpayers who will shoulder most of the Federal tax burden. This minimum wage increase will continue to incentivize businesses to consolidate their workforce and invest in automation and not hire more $15/hour employees. Moreover, the College Affordability Plan doesn’t actually solve the student loan crisis. Instead, it adds another government program to further bloat the annual deficit. 

2.  Taxes Expected to Rise $1 Trillion/Year

The Federal Budget is expected to grow under a new President Clinton, but taxes will probably rise as well. According to the Americans for Tax Reform, Hillary proposes numerous increases including…

• $350 billion from 28% cap on itemized deductions.

• $275 billion from undefined business taxes.

• $400 billion from a ‘Fairness’ tax on carried interest of capital gains and a death tax hike.

The American’s for Tax Reform estimates the true tax hike to exceed $1 trillion per year. This continued course of taxing wealthy individuals and businesses will affect capital investments in the private sector. The more revenue that is funneled into government coffers has the potential to further depress economic growth. Higher taxes do not usually lead to positive economic development.   

3.  A Possible Recession

Recessions are unavoidable in a normal economic cycle. A recession may be unavoidable with or without a President Hillary Clinton. However, a successful Clinton White House bid may push the economy further toward recession. According to a Washington Times op-ed,   

“A just-released study prepared by the respected Beacon Hill Institute for the Dallas-based National Center for Policy Analysis finds that Hillary’s tax plan ‘would fund tens of thousands of government jobs at the cost of five times as many private sector jobs, while lowering personal income, GDP and business investment.’ Business investment is already a major weak spot of the economy. The study finds that the Clinton tax hikes would crush new investment and shrink GDP.”

If new investments suffer and the GDP shrinks, this will affect the average investor. It’s important to position your portfolio for possible economic shifts on the horizon.

Going Forward in 2017

We cannot predict elections and future market swings. We don’t know what the actual economic impact of the election will be, but we are prepared to adjust portfolios regardless of the outcome.  

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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