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Surprise Tax Bill Brings Holiday Gifts

Surprise Tax Bill Brings Holiday Gifts

You probably weren’t expecting any gifts from your representatives in Washington this year. They may have given you one, though. A huge spending bill passed just before everyone left town for the holidays contained a variety of changes.

An annual “tax extender” bill has become a regular December event in recent years. Congress authorizes many tax provisions on a year-by-year basis instead of through permanent law. This allows them to pretend the various breaks will not affect the government’s long-term revenue projections. No one complains because they are glad to get relief for another year.

This time, however, Congress decided to bite the bullet and write some of the formerly piecemeal provisions into permanent statutes. Of course, “permanent” in this context doesn’t mean “forever.” A future Congress could always reverse course, but they at least eliminated the annual year-end drill for now.

Tax experts are still digging through the many “miscellaneous” provisions written into the multi-thousand-page bill. Here are some highlights we’ve learned about so far.

The IRA “Qualified Charitable Distribution” provision is now permanent. This allows IRA owners over age 70½ to direct a distribution of $100,000 or less to a qualified charity without including the amount in the taxpayer’s income that year. The distribution will also count toward that year’s Required Mandatory Distribution, or RMD.

The bill included a number of enhancements to “529” educational savings accounts. For the first time, computers will be considered “qualified education expenses.” Peripheral hardware like printers, software and internet service fees also qualify as long as primarily by the student.

Notably, the student doesn’t have to use the computer equipment solely or even primarily for educational purposes. A bona-fide student can write an occasional book report on the computer and then use it for video games the rest of the time.

The new ABLE (Achieving a Better Life Experience) accounts for disabled persons can now be established in any state, not necessarily the one in which the disabled person lives. Once implemented, this will make ABLE accounts function much like 529 accounts. The law even refers to them as “529A” accounts.

The ABLE accounts will allow disabled persons to receive gifts or other income up to $14,000 per year and save it in a special account without affecting Medicaid or other government benefit eligibility. ABLE donations can be used to pay certain standard expenses like housing, medical bills and therapy.

Several provisions aimed at working families are now permanent, including the enhanced Child Tax Credit, American Opportunity Tax Credit, Earned Income Tax Credit, and the ability to deduct state and local sales taxes in lieu of state income taxes.

The corporate research and development tax credit, which gives businesses tax breaks for research expenses, is now permanent. This will help businesses plan long-term projects more efficiently, since they won’t have to wonder if the credit will be extended another year.

Small business expensing of up to $500,000 annually in machinery, office equipment and computer technology is now permanent. This will relieve many small businesses of the need to amortize equipment purchases over longer periods. They can instead deduct the purchase price in the same year, within certain limits.

The items mentioned above are not a complete list. The last-minute lobbying frenzy produced a huge bill that will take time to decipher. It may well contain other, less beneficial changes. The devil is always in the details.

In any case, the tax code remains complicated. Please consult your accountant or another tax expert before making any important decisions. Republic Wealth is always happy to speak with you or your tax preparer to coordinate your financial plan with tax planning.


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’s current written disclosure statement discussing our advisory services and fees is available upon request.




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Eye on Money: Investing for Income

Eye on Money: Investing for Income

The January/February 2016 Eye On Money is now available on Republic Wealth.com, featuring stories on:

  • Six potential sources of investment income
  • Three things to know about the home office deduction
  • How it pays to go green before the end of 2016
  • Why invest in stocks?
  • Changes to college aid applications
  • Ten New Year financial resolutions
  • Your 401K options when you leave a job

 

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Clock Running Out for 2015

Clock Running Out for 2015

Time is running out for the stock market to end 2015 in the black. As of Monday, Dec. 21, both the Dow Jones Industrial Average and S&P 500 Index showed slightly negative year-to-date results. Can a last-minute rally save the year?

A last-minute rally is certainly possible. If we get one, it will just make 2015 end at break-even or mildly positive. No one will call it a banner year.

This may be positive in one way. This year brought a significant deterioration in corporate earnings, due partly to the stronger U.S. dollar. Had U.S. equity prices continued higher, we might be looking at a much more serious overvaluation right now. A flat year could actually set up a rally in 2016 if earnings recover.

The market’s other problems, as we noted last week in Fasten Your Year-End Seat Belt, include both oil prices and high-yield bonds. Crude oil broke below $35 this week, which put it below the 2008 panic low point. Analysts at Citigroup and Goldman Sachs both have $20 downside targets for oil. OPEC is unwilling to reduce production while U.S. shale producers are still providing ample inventory. A move in Congress to lift the crude oil export ban probably came too late in the cycle to make much difference.

The degree to which energy drives capital expenditures in many parts of the economy wasn’t well known until recently. Now it is painfully clear. Cancelled projects mean that energy companies aren’t buying or leasing a wide variety of supplies and equipment. Excess supplies of everything from iron pipe to portable buildings to dump trucks are weighing down businesses in many sectors.

The many small energy companies that financed their operations with high yield bonds are having a rough time, too. The lucky ones are making enough revenue from their production to cover debt service and operating costs. The unlucky ones are going deeper into the red every day. The lower oil prices go, the more companies fall into that “unlucky” category. Yet oil prices can’t recover while supplies remain so abundant. Escaping from the trap is proving very difficult for many.

The non-energy portion of the high yield bond market is actually holding up quite well. Default rates are still low by historic standards. The high-profile failures have been almost entirely in funds with heavy energy exposure. Junk bonds issued to fund merger and acquisition activity are mostly in good shape. Credit is still available on good terms to healthy companies in stable sectors.

It’s also worth noting that the two main NASDAQ indexes, the broad NASDAQ Composite and the large-cap NASDAQ 100, are both positive for the year with open gains in the mid-single digit range. This is due mostly to outperformance in the biotechnology segment and strong gains in a handful of other companies, notably Amazon.com (AMZN) and Netflix (NFLX).

In fact, this year’s more-or-less flat market in the benchmarks conceals weakness in most individual stocks. This chart from Bespoke Investment Group shows how the “average” stocks within each sector is down substantially from its 52-week high. This doesn’t show up in the benchmark indexes because gains in a handful of large-cap stocks offset losses elsewhere.
 


As was widely expected, the Federal Reserve raised its overnight lending rate last week. Markets took the news as well as we could expect. We saw volatile trading as analysts tried to assess the Fed’s future plans, and Friday’s “quadruple-witching” option expiration also confused the picture. The fact that the Fed’s first rate increase since 2006 didn’t immediately crash the markets is a good sign.

We are right now at a point in which a “Santa Claus Rally” is often underway. It is a little disturbing the market hasn’t yet seen Santa this year. It hasn’t received lumps of coal, either, so maybe the year will end neither naughty nor nice.

Flat years are never fun, but they are certainly better than sharply negative years. We have not seen one of those years in some time, so 2015 will beat the odds if it ends near even. Only time will show us whether 2016 is better or worse. It will be a bad omen if a Santa Rally doesn’t materialize before year-end. In either case, we will monitor the markets as always and take the position we think is most prudent.


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’s current written disclosure statement discussing our advisory services and fees is available upon request.


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Fasten Your Year-End Seat Belt

Fasten Your Year-End Seat Belt

Financial markets hit three big bumps last week. One of them will resolve itself tomorrow, while the other two may persist a few more weeks. The year is ending just as uncomfortably as it began.

The main question mark is interest rates. Federal Reserve opened a meeting today that will decide if the economy can handle tighter monetary policy. Recent speeches from Janet Yellen and others suggest they will finally nudge short-term rates higher after years of near-zero yields.

In our view, the case for higher interest rates is very clear. The “Plow Horse Recovery” is slowly but surely lifting the U.S. economy out of the recessionary depths. The labor market is tightening and wages are beginning to move higher. Nevertheless, traders fear the unknown, and for now no one really knows what the Fed will say or do. We will all find out together on Wednesday afternoon.

Fear of this unknown has driven volatility higher, but it wasn’t the only factor. Crude oil’s price breakdown below the $40 level also spooked investors, especially those with energy sector exposure. Other segments ranging from banks to high yield bonds to industrial stocks also weakened, showing how capital spending by energy companies has an impact far beyond the energy sector.

The wariness surrounding Federal Reserve policy and falling energy prices also shows up in currency markets. The dollar’s strength over the last year is partly a result of the U.S. having higher interest rates than most of the developed world. Some rates in the Eurozone and Japan are presently below zero.

If the Fed raises U.S. rates higher still, the differential will attract capital here and strengthen the greenback even further. This will reduce earnings by U.S. firms that make sales overseas. It could also send oil prices even lower in dollar terms, further aggravating the energy problem.

One way or another, the Fed question ought to be resolved this week. If crude oil can stabilize, then the market volatility should subside, right? Maybe. A third factor is in play, too: the calendar.

December often brings odd trading action as investors execute tax-related trades ahead of year-end. Large mutual funds and hedge funds also engage in “window dressing” trades designed to make their year-end holdings look more attractive. This further clouds the meaning of market movements. Early January will be similarly unclear.

So will we finally have an all-clear by the middle of January? Maybe – but then the Fed will hold another policy meeting on Jan. 26-27, putting everyone right back in the dark.

The calendar can mean good news, too.  The second half of January often brings a “Santa Claus Rally” as tax selling subsides and portfolio managers buy the year’s winning stocks. We are just now entering this period as 2015 winds down.

Taking a wider view, this year looks similar to 2011. A late-summer downturn left the main indexes in negative territory as December began, but they rose back into the black thanks to a year-end rally. We don’t know if the same will happen this year, but history shows it is possible.

What should investors do about all these competing influences? In most cases, the answer is “Nothing.” You are not trying to stay ahead of an arbitrary benchmark over short periods. Your goals are probably much longer-term. If you are making adequate progress toward them, you can safely ignore daily fluctuations and  headline events.

As a Republic Wealth client, you engaged us precisely because you want someone else with more specialized knowledge to keep your assets in an appropriate position. This frees you to focus on more important matters, like your own occupation and family.

With the holidays approaching, you can rest assured that Republic Wealth is on the job and watching the markets daily. We draw on our years of experience to manage your assets in all market conditions. We are always happy to discuss your individual situation, so call on us if you have any concerns at all.



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’s current written disclosure statement discussing our advisory services and fees is available upon request.




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Keep Your Portfolio On the Right Track

Keep Your Portfolio On the Right Track

Every investor wants to make a reasonable return on his or her money. What is a “reasonable” return? The answer may surprise you.

One common answer: success lies in “beating the market.” If passively holding a broad stock index like the S&P 500 would have made 20% in a given time period, then anything less than 20% was unsuccessful.

This idea has a superficially appealing logic, but it also has some problems.

First, indexes can go both directions. If the S&P 500 falls 20% and your account falls “only” 18%, you “beat the market” by two percentage points. Would you celebrate that achievement? Probably not.

What people really mean is that they want to beat the market when it goes up, but not lose any value when it goes down.

This would indeed be nice – if it ever happened. Thousands of professional managers wish they could deliver such a result. Few ever do. As a practical matter, investors must choose.

•    If you want to invest aggressively and achieve above-market returns, there are ways to do it.
•    If you want to protect your capital from bear market volatility and losses, you can do that, too.

Pick one or the other - because you can’t have both.

The year 2015 is a good example. Despite some wild swings, the S&P 500 only shows a slight gain with the year almost over. Yes, a few sectors like health care outperformed, but 2015 has been disappointing for many investors.

Is their disappointment justified? If they base it only on this one year, then no, it isn’t justified. Judging success after a single twelve-month period is like calling a football game’s winner after the first possession. The game has a long way to go.

History shows stocks performed well over long periods. Within that success, however, have been many shorter losing or flat periods. If you happen to be in such a period, it can be hard to believe better times are coming. Nevertheless, if the future is like the past, we can be confident the market will recover eventually.

There’s another element to evaluating success, though. What does the stock market’s performance have to do with your individual goals? Very little. So why should beating or lagging the market be your benchmark for success?

Answer: It shouldn’t be.

The real benchmark for success is whether you are making progress toward your ultimate goal. If you are, then whatever the stock market does is irrelevant. You are accomplishing what you need to accomplish.

If you want to retire 20 years from now, you need $5,000,000 to do it, and you intend to save 10% of your income, then a little math shows the return you need to reach your goal on time.

That number, whatever it is, is unrelated to the stock market’s return in any given year.

If you are making progress toward your goal and staying within the range of volatility you originally expected, then your returns relative to the S&P 500 or any other index bear little importance.

Conversely, if you find yourself worried by volatility, then it may be a good idea to reassess your goals and your strategy for reaching them. This is where it helps to have a trusted advisor like Republic Wealth. We help you define your goals realistically and develop a plan for reaching them.

Sometimes adjusting your plan is the right move. If so, it should be because your circumstances changed, not because you feel the market is leaving you behind.

The market is not your destination. Stay on the right track and you will arrive at the right place.



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’s current written disclosure statement discussing our advisory services and fees is available upon request.




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Making the Most of a Choppy Year

Making the Most of a Choppy Year

With eleven months in the books, 2015 looks like a flat year. The S&P 500 Index was up only about 3% and the Dow Jones Industrial Average was up about 2% as of Nov. 30. Before we jump to conclusions, let’s remember a few important points.

First, short periods tell us little about the bigger picture. We could add or subtract a few months and see significantly different results. Doing so might or might not reveal anything useful.

Second - and more important – the fact that year-to-date results are flat does not mean we have had a flat year. We had anything but a flat year in 2015.

The Dow traded between 15,666 and 18,312 this year. That 2,646-point range would be an almost 17 percent gain if you had been able to buy at the low and sell at the high (an impossible task in this case, since the high occurred months before the low point).

This means 2015 will have been a volatile year even if it ends near break-even. Volatility can be the trader’s friend, but not always. Hindsight is always perfect. In the real world, the best anyone can do is make a decision each day based on the information available at that point.

Very few market segments looked impressive in recent months. Consider these charts of the S&P 500 and Russell 2000. They are the main benchmarks for domestic large-cap and small-cap stocks, respectively.


You can see how the S&P 500 ended near where it was in early June. Yet the period was hardly “flat,” considering the abrupt late August plunge. (Incidentally, David Levy did a Fear and Investing radio interview that day. It is worth reading or listening again.)

Were small caps a better alternative? Not over the last six months. The Russell 2000 Index actually fell over this period.

Large cap growth stocks have been the best-performing stock category recently, but still aren’t impressive by most standards. They churned sideways most of the year, fell in August and spent the last few months recovering that loss. 

What about technology stocks or transports? Surely, they delivered some gains. Let’s go to the charts.


From June through November, the tech-heavy Nasdaq Composite posted a very slight gain. The Dow Jones Transports retreated over the same period.

One might think that lower fuel prices would help transportation stocks by reducing their costs. That’s true, but declines in shipping volume appear to be more than offsetting lower fuel costs – a warning sign of possible economic slowdown ahead.

Gold? Treasury bonds? Let’s look.


Gold bullion delivered terrible performance over the last six months This is partly a consequence of higher interest rate expectations. Gold has no yield, so higher interest rates make it relatively more expensive to hold.

Treasury bonds moved up a bit in price, but only with considerable volatility. Bond prices move inversely to interest rates, so the expectation of Federal Reserve tightening this month has not been positive for bonds.

Finally, let’s examine crude oil and the U.S. dollar.


Oil futures tumbled again, resuming the slide that began back in mid-2014 and partially recovered in early 2015. Crude oil is again near the $40 mark. This is devastating for highly leveraged energy producers. It also helps explain this year’s rough performance in high yield bonds.

The US Dollar Index is one of the few asset classes to move up the last six months. This explains some of the subpar stock market results, since the stronger dollar makes U.S. exports more expensive for foreign customers. The result is lower earnings for U.S. companies that do business overseas.

The strengthening dollar also affects foreign stock prices negatively for Americans. Some foreign markets have been performing well, but not well enough to overcome the drag of converting the returns back into dollars.

Now, what does all this data tell us? The markets are presently going through a difficult period. This isn’t unusual; what was unusual was relatively steady gains the prior two years. Over the long run, stocks spend most of their lives going sideways. The gains and losses tend to be concentrated in shorter periods.

The best way to capture gains is to preserve your capital in bear markets and choppy markets, so that you can take maximum advantage of bullish periods. This is what we attempt to do at Republic Wealth.

We don’t know what December will bring, much less how 2016 will look. However, we know that we would prefer not to spend 2016 making up losses incurred in 2015, if we have the opportunity.



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’s current written disclosure statement discussing our advisory services and fees is available upon request.




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Don't Let Fear Take Control

Don't Let Fear Take Control

We’re all a little nervous after this month’s terrorist attacks. Paris drew the most news coverage, maybe because it is most familiar, but the world is full of senseless violence. It comes from many sources and can happen anywhere.

On the other hand, mass shootings and bombings are still quite rare. The vast majority of us have never seen a terror attack in person. We see them on TV and we feel like we were actually there. This is good in some ways. It gives us greater empathy for the victims and gratitude to be in safer circumstances.

Fear is normal and even helpful, but we can’t let it take control. Fear is an emotion and emotional decisions are usually poor decisions. That is the case whether we fear terrorism or bear markets. The response to both should be similar.

If you travel to Europe, the chance a terror attack will directly affect you is small but not zero. Taking a few simple precautions is a good idea. Having done what you can, you can proceed to enjoy your vacation or conduct your business.

If you invest in stocks or bonds for retirement, the chance a bear market will keep you from reaching your goal is small but not zero. You can improve your odds of success with a few simple steps.

Travelers who let fear take control fail to enjoy themselves. They might cancel their plans completely, missing the chance to see a different culture in person.

Investors who let fear take control might move to cash at the wrong time and miss stock market gains. In extreme cases, they might fall short of their goals and have to scale back their retirement dreams.

Terrorism and bear markets aren’t imaginary. They do exist and they can hurt you, but you can’t make them disappear. Once you take sensible precautions, the best move is to let go of the fear and think about something else.

For example, look at Israel. Terror attacks have been happening regularly for decades. They happen even though the government employs far more aggressive security measures than we do in the U.S. or Europe. Yet Israel still has a thriving economy and high standard of living. This is because people understand the threat, adapt to it and then go on with their lives.

We can take a similar attitude with financial challenges. Have a financial plan, develop realistic goals, be prudently diversified, and seek professional help. The steps sound simple, and in many ways, they are simple. The hard part is sticking with them.

At Republic Wealth, we follow a rigorous discipline based on facts, not fear. We know bear markets can strike any time. We’ve been through them before. Our goal is to keep our clients free of financial fear. When they feel confident of reaching their own goals, we know we’ve succeeded.


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’s current written disclosure statement discussing our advisory services and fees is available upon request.




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Five Useful Year-end Investment Tips

Five Useful Year-end Investment Tips

Soon we will flip our calendar pages to the last month of 2015. Now is a great time to give your financial plan a quick review, before holiday parties and vacation time intervene.

If you are a Republic Wealth client, we review your plan regularly and consult with you on any moves we think would help. Here are five questions we always ask as year-end approaches.


Is your asset allocation plan still suitable?

The assets you own – your home, other real estate, stocks, a small business, etc – add up on the asset side of your balance sheet. Do you have the right mix, considering your personal situation and long-term goals?

Everyone should ask this question each year. Circumstances change. If nothing else, you are now a year closer to retirement age than you were twelve months ago. You might have made significant changes that would affect your plan. Events like marriage, new children, buying or selling a business, receiving an inheritance, changing jobs, moving to a new city are all important to consider.

You want to consider both your liquid and illiquid investment. By “liquid”, we mean those you can easily sell, like stocks or mutual funds. The portfolio should be diversified and have an appropriate risk profile

Your illiquid investments, like real estate or privately held businesses, are equally important. They may have great potential, but don’t let yourself become “land poor.”


Do you want to make any charitable gifts?

Once you and your family are secure, you may want to use part of your wealth to help other worthy causes. Using tax advantages strategically can enhance your donation’s value to the charity while reducing your own tax liabilities.

Donations to “Donor advised funds” can be an excellent move at year-end. You can decide later exactly which charity receives your gift, but receive the tax deduction right away – for tax year 2015 if you donate by Dec. 31.

Most donor advised funds can accept either cash or “in-kind” securities. Donating a stock in which you have an unrealized long-term capital gain offers a double benefit. You avoid capital gains tax on the gain while also receiving a deduction for the stock’s full value.


Can you harvest any capital losses to reduce this year’s tax liability?

Active investors know that occasional losses are inevitable. The best response is to acknowledge any mistakes, learn from the experience and move on. At the same time, you don’t want to be impatient and give up too soon. The result can be a portfolio of unrealized losses.

While such stocks might recover eventually, they can offer immediate value when paired with realized gains. If you booked a capital gain in 2015 and have unrealized losses as well, selling them by year-end can help reduce or even eliminate your capital gains tax liability.

We call this “tax loss harvesting” because it truly is a harvest. Just as farmers harvest food from bare ground, you can harvest tax benefits from your unprofitable investments. (As always, consult your CPA before making any important tax decisions.)


Have you made the maximum yearly contribution to your retirement plans?

Contributing as much as possible to tax-advantaged retirement plans like your 401k is the best way to insure your older years are comfortable. Maximum contribution limits vary by plan type. We listed them all for you back in January, so check out 2015 Brings Expanded Retirement Saving Opportunities to learn more.

If your contributions so far, plus whatever is scheduled by year-end, are less than the limit, try to find additional cash you can move into the retirement vehicle. Once there, it can grow either tax-free or tax-deferred, boosting your retirement income down the road.

Incidentally, most of the 2015 contribution limits will be the same in 2016. This year’s unusually low inflation means there is no need to bump them up to keep pace with living costs.


Should you move assets outside your estate?

Investors with sizable assets should already have a detailed estate plan that ensures minimum tax liability or other problems for your heirs. One way to do this is to “gift” assets to family members long before you die.

Under current law, an individual taxpayer can give up to $14,000 per person, per year, without incurring gift tax. A married couple can give up to $28,000 per person, per year. This is a simple way to move assets out of your estate and reduce estate taxes in the future.

Many wealthy investors find that giving assets to children and grandchildren in this way teaches them how to manage money and make good financial decisions. The sooner you do this, the better, so you can be here to watch the results.


Conclusion

While the five points above don’t include everything you should consider at year-end, they are a good start. You still have plenty of time to make any necessary moves. We suggest doing it now so you can then relax and enjoy the rest of 2015. Feel free to call on Republic Wealth if you have any questions.




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’s current written disclosure statement discussing our advisory services and fees is available upon request.




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Social Security Changes the Rules

Social Security Changes the Rules

Much like Texas weather, the federal government’s retirement rules can change anytime. Some changes this month could have a big impact on certain retired people or those nearing retirement age.

A cottage advisory industry sprang up in recent years to help Baby Boomers maximize their Social Security benefits. Many advocated strategies like “file & suspend” that exploit the retirement program’s complex rules to collect higher benefits.

Those who used the loopholes weren’t doing anything wrong, but the Social Security Administration still took a dim view. Only Congressional action could close off these strategies, and no such action was forthcoming… until now.

President Obama signed the Bipartisan Budget Act of 2015 on November 2. This headed off a fight over government spending and the debt ceiling as we head into next year’s elections, but it paid for new spending with tweaks to existing programs – like Social Security.

If you aren’t currently in your 60s, none of this applies to you. You are either too young or too old to make the decisions in question. It might affect your relatives or friends, though, so be sure to let them know. Here is a quick summary of the changes.

File and Suspend

•    Currently: A filer who is at or past Full Retirement Age (FRA), can file for individual benefits, but suspend receiving them and allow a spouse or dependent to collect off of their record.

•    Through April 30, 2016: Anyone 66 or older can still file and suspend to allow an eligible spouse or dependent to collect a benefit off their record under the old rules.

•    After April 30, 2016: “File and suspend” will no longer enable a spouse or dependent to collect benefits off of the filer’s record, unless the filer takes a benefit. For a spouse or dependent to collect a benefit, filers must collect their own benefit and forgo delayed retirement credits. If an individual suspends benefits, all spousal and dependent benefits will be suspended.

Restricted Application for Spousal Benefits

•    Currently: A spouse who is at or past FRA, and who has not received any benefits, can choose a spousal benefit only (referred to as a Restricted Application) or his or her own individual benefit.

•    Anyone 62+ by the end of 2015: Is grandfathered and retains the ability to restrict their claim to spousal benefits only if they wait to collect until they reach their FRA.

•    After year-end 2015: Individuals who are younger than 62 will not have the choice of which benefit they collect when they reach FRA. Regardless of their age, they will be “deemed” to have filed for the highest benefit. They will no longer have the option to restrict their benefit to their spousal benefit only.

Lump Sum Voluntary Reinstatement of Benefits

•    Currently: An individual who files and suspends can request that all suspended payments be paid in a single lump sum.

•    Through April 30, 2016: Individuals who will be at least age 66, and want to utilize this strategy, will need to file and suspend benefits.

•    Individuals who file and suspend benefits after April 30, 2016 will no longer be able to request a lump sum payment of all suspended benefits.

Social Security is an important retirement income source for many Americans, but the law’s creators never intended it to be the only source. They wished only to provide basic income for those too old to work. Those with successful careers who planned for retirement shouldn’t need to bend the rules. For them, these changes are of no consequence.

Retirement income planning is an important part of the broader financial plans we develop for all Republic Wealth clients. We can review your situation and make sure you are on track to meet your goals at any time. Feel free to call on us.



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’s current written disclosure statement discussing our advisory services and fees is available upon request.




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Eye on Money: Year-End Tax Planning

Eye on Money: Year-End Tax Planning

b2ap3_thumbnail_Eye-On-Money-Nov15-cover-small.jpgThe November/December 2015 Eye On Money is now available on Republic Wealth.com, featuring stories on:

  • Three Ways to Avoid a Wash Sale
  • 529 College Savings Plans
  • What Are the Main Types of U.S. Treasury Securities?
  • Donate, But Do It Wisely
  • 2015 Year-End Tax Planning
  • Paris For the Holidays

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