Not all investments make money and sometimes things don’t go quite like they were planned. This is the nature of Investment Risk.

In these cases to may become necessary to “clean out the attic” and get rid of some less than successful investment choices and trade them for some more promising choices.

Fortunately the IRS Tax Code (IRC) allows you to write off investment losses against investment gains in the year they are realized and even carry forward some of those losses to future years to reduce your Capital Gains Tax liability. In addition some of the investment losses can also be written off against your Income Tax liability.

However there are some somewhat complicated rules which may require some rather diligent recordkeeping.

Short-Term Gains and Losses and Long Term Gains and Losses

Short-Term Gains and Losses are for investments that are held for less than one year. They are taxed at your current Income Tax rate. Long Term Gain and Losses on investments held for more than a year are taxed at special Capital Gains rates. This is a matching game. Short-Term losses are deducted against Short-Term gains and Long-Term losses are deducted against Long-Term gains. Fortunately most of this information is sorted out and contained in the 1099 tax statement received each year from your Broker. Missing information should be contained in your own records, hence the need for diligent record-keeping. A good Financial Advisor should keep this on file for you.

Account Registrations?

Qualified Accounts – Qualified Accounts, such as an IRA or 401k, are accounts that are tax protected by the IRS. Typically income tax will be paid only when funds, including any investment gains, are distributed from the account. This means that Tax Loss harvesting doesn’t have much usefulness in these accounts since there is no Capital Gains Tax applied to these accounts.

Non-Qualified Accounts – These are accounts that are not tax-protected by the IRS. They are subject to Capital Gains taxes, Income Taxes, and Dividend Taxes. This is where most of our attention needs to be.

What’s the Catch?

Wash Sale Rules – So can you just sell an investment, book the tax loss, and then just immediately buy it back? Not quite. The IRS disallows the tax deduction if “the sale of stock or securities at a loss is within 30 days before or after you buy or acquire in a fully taxable trade, or acquire a contract or option to buy, substantially identical stock or securities.” (See IRS Pub. 550 for more details). So, watch the dates of the trades so you don’t get caught in this trap.

Tax Lot Selling

Professional Investment Managers should have sophisticated software that allows them to pick and choose which investment purchase (“lot”) to sell to realize the investment loss. This comes in handy when there are multiple purchases of an investment that occurred over a period of time at different prices. This may allow you to maximize the tax loss on the sale of your investment shares.

Tax Loss Carry Forwards

If you have a capital loss that is greater than what you can use for current year tax deductions the IRS allows you to carry it forward into future tax years.

An Extra Added Bonus

The IRS also allows you to use a capital loss deduction of up to $3000 of taxable income. This is a good way to potentially reduce your Income Tax liability in addition to your Capital Gains tax liability. This can also be carried forward to future year and applied again, up to the limit, until it is used up.

Conclusion

You can study more about tax management of your investments in our presentation on Tax Avoidance Strategies on our website www.SWRetire.com as well as learn more about our full service Financial Advisory practice. You should also consult your Tax Professional (CPA) to review your tax situation to ensure the most desirable outcome.

Views, opinions and analyses expressed in this presentation are those of Southwestern Retirement and not those of Independent Financial Group, LLC.

Registered Representative offering Securities and Advisory Services through Independent Financial Group LLC,

a Registered Broker-Dealer and Investment Adviser. Member FINRA/SIPC.

 Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC.

OSJ Address: 4041 MacArthur Blvd., Suite 240, Newport Beach, CA 92660

The post Tax Loss Harvesting appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

Laddered Portfolios can be made out of any group individual securities that have a fixed maturity. The intent is to remove interest rate risk by holding the securities to maturity thus eliminating price fluctuations that can be caused by changing interest rates. Other investment risks such default of the issuer or currency risk still remain. The risk of reinvesting the funds received at maturity at a lower rate also remains.

Typical Securities Often Used in Laddered Portfolios

Corporate Bonds – Generally have higher yields because of the perceived higher risk of the corporate issuer. Interest income is fully taxable at the Federal and State levels.

Municipal Bonds – Issued by State and Local issuing authorities. Yields are determined by the relative risk of the issuing authority. These bonds are exempt from Federal Tax and can be exempt from State tax if the taxpayer is a resident of that state.

U.S. Treasuries — Generally considered as the lowest risk security by the investment community. Interest income is taxable at the Federal level but tax exempt at the State level.

Certificates of Deposit (Fixed Rate) – Usually issued by Banks and Federal Deposit Institutions. These are principal protected by FDIC insurance up to certain amounts. Interest income is fully taxable.

Certificates of Deposit (Market-Linked) – These CDs are issued by Financial Institutions with access to the Stock Market. The yield is tied to stock market performance over a certain period instead of a fixed rate. Interest income can be more or less than a fixed rate CD depending on market performance. They are principal-protected, the minimum return is zero, and FDIC insured.

Mix and Match – It is also possible to put together several of these different types of securities in complimentary Ladders to take advantage of each of their unique characteristics. An example would be a mix of Fixed Rate CDs and Market-Linked CDs for an investor that wants to maintain some exposure to a rising market environment.

 Other Considerations

Risk Avoidance – Investors often use Laddered Portfolios to “park” cash if they do not choose to participate in the Stock or Bond Market but still would like to generate some interest income above Money Market rates.

Maturity Matching – Laddered Portfolios can be tailored to accrue interest and then generate free cash at very specific intervals.  The securities that make up the Laddered Portfolio are bought on the large secondary market where precise maturity dates can be chosen.

Liquidity Risk – The securities in a Laddered Portfolio usually can be sold or redeemed before maturity but this may expose the Investor to market price risk or redemption penalties. The key to this strategy working successfully is to hold the securities to maturity to avoid these risks.

Tax Equivalent Yield – It may be helpful to calculate a Tax Equivalent Yield in order to compare the tax liability of your interest payments of different types of securities which to build your Laddered Portfolio. This will help you make an “apples-to-apples” comparison of the actual income you would receive in comparing your different options. Your Financial Advisor or Tax Professional should be able to help you do this. 

Conclusion

Developing Laddered Portfolios may take sophisticated trading software to do properly. Investors may want to consider consolidating larger positions in order to avoid excess trading costs. You can learn more about Investment Strategies at our website www.SWRetire.com as well as learn more about our full service Financial Advisory practice.

Views, opinions and analyses expressed in this presentation are those of Southwestern Retirement and not those of Independent Financial Group, LLC.

Registered Representative offering Securities and Advisory Services through Independent Financial Group LLC,

a Registered Broker-Dealer and Investment Adviser. Member FINRA/SIPC.

 Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC.

OSJ Address: 4041 MacArthur Blvd., Suite 240, Newport Beach, CA 92660

The post Laddered Bond and CD Portfolios appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

Nearly everyone can save something. Even small cash savings may be the start of something big if they are invested wisely.

Sometimes, the immediate wins out over the distant. To young adults, retirement can seem so far away. Instead of directing X dollars a month toward some far-off financial objective, why not use it for something here and now, like a payment on a student loan or a car? This is indeed practical, and it may be necessary. Even so, paying yourself first should be as much of a priority as paying today’s bills or paying your creditors.

Some workers fail to enroll in retirement plans because they anticipate leaving. They start a job with an assumption that it may only be short term, so they avoid signing up, even though human resources encourages them. Time passes. Six months turn into six years. Still, they are unenrolled. (Speaking of short-term or transitory work, many people in the gig economy never get such encouragement; they have no access to a workplace retirement plan at all.)

Other young adults feel they have too little to start saving or investing. Maybe when they are further along in their careers, the time will be right – but not now. Currently, they cannot contribute big monthly or quarterly amounts to retirement accounts, so what is the point of starting today?    

 The point can be expressed in two words: compound interest. Even small retirement account contributions have potential to snowball into much larger sums with time. Suppose a 25-year-old puts just $100 in a retirement plan earning 8% a year. Suppose they keep doing that every month for 35 years. How much money is in the account at age 60? $100 x 12 x 35, or $42,000? No, $217,114, thanks to annual compounded growth. As their salary grows, the monthly contributions can increase, thereby positioning the account to grow even larger. Another important thing to remember is that the longer a sum has been left to compound, the greater the annual compounding becomes. The takeaway here: get an early start.1  

 Any retirement saver should strive to get an employer match. Some companies will match a percentage of a worker’s retirement plan contribution once it exceeds a certain level. This is literally free money. Who would turn down free money?  

Just how many Americans are not yet saving for retirement? Earlier this year, an Edward Jones survey put the figure at 51%. If you are reading this, you are likely in the other 49% and have been for some time. Keep up the good work.2

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

 Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered  investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx [6/21/18]

2 – forbes.com/sites/kateashford/2018/02/28/retirement-3/ [2/28/18]

The post Why Do People Put Off Saving for Retirement? appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

Make no mistake, a written retirement plan sharpens your focus. It can refine dreams into goals and express a strategy to pursue them. According to a Charles Schwab study, just 24% of Americans plan their financial futures according to a written strategy. Here is why you should join their ranks, if you are not yet among them.1,2

You can figure out the “when” of retirement planning. When do you think you will retire and start drawing income from your taxable and tax-advantaged accounts? At what age do you anticipate you will start to collect Social Security? How long do you think you will live? No, you cannot precisely know the answers to these questions at this point – but you can make reasonable assumptions. Your assumptions may be altered, it is true – but a good retirement plan is an evolving document, one that can be revised with changing times.   

You can set a target monthly or annual savings rate. Once you have considered some of the “whens,” you can move on to “how.” Assuming a conservative rate of return on your invested assets, you can specify how much to defer into retirement accounts.

 You can decide on a risk tolerance and an investment mix that agrees with it. Ultimately, you will invest in a way that a) makes sense for your objectives and b) makes you comfortable. The 06-TB-1256 investment mix that you decide on today may not be the one you will favor ten years from now or even three years from now. Regular portfolio reviews should complement the stated investment approach.

 You can think about ways to get more retirement income instead of less. Tax reduction should be part of your retirement strategy. Think about the possibility of part of your Social Security income being taxed. Think about tax on your Required Minimum Distributions (RMDs) from your IRAs and employee retirement plan. What could you do to manage, or even minimize, the income and capital gains taxes ahead of you?

You can tackle the medical expense question. That is, how will you fund the medical care that you will inevitably need to greater or lesser degree someday? Should you assign part of your savings to a special account or form of insurance for that purpose? Retiring before 65 may mean paying for some private health insurance in the years before Medicare eligibility.

You can think about your legacy. While a retirement plan should not be equated with an estate plan, the very fact of planning for your later years does make you think about some things: where you want your money to go when you are gone; your endgame for your company or professional practice; whether part of your accumulated wealth should go to causes or charities.

A written plan promotes confidence and a degree of control. A 2017 Wells Fargo/Gallup survey determined that those with written retirement plans were nearly twice as confident of having sufficient retirement income in the future, compared to those with no written plan.3

If you lack a written retirement plan, talk to the financial professional you know and trust about one. Writing it all down may make a difference in planning for your second act.  

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

  Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered  investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – kiplinger.com/article/retirement/T023-C032-S014-do-you-have-a-written-financial-plan.html [10/25/17]

2 – aboutschwab.com/images/uploads/inline/Charles_Schwab-Modern_Wealth_Index-findings_deck.pdf [6/17]

3 – time.com/money/4860595/how-to-retire-wealthy/ [7/18/17]

The post Why You Want a Retirement Plan in Writing appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

It can be easier to dedicate yourself to a goal rather than a hope or a wish. That level of dedication is important, as saving and investing usually comes with a degree of personal sacrifice. When you dedicate yourself to a saving/investing goal, some positive financial “side effects” may occur.

A goal encourages you to save consistently. If you are saving and investing to reach a specific dollar figure, you likely also have a date for reaching it in mind. Pair a date with a saving or investing goal, and you have a time horizon, a self-imposed deadline, and you can start to see how you need to save or invest to try and achieve your goal, and what kind of savings or investments to put to work on your behalf.

You see the goal within a larger financial context. This big-picture perspective may help you from making frivolous purchases you might later regret or taking on a big debt that might impede your progress toward reaching your target.

You see clear steps toward your goal. Saving $1 million over a lifetime might seem daunting to the average person who has never looked at how it might be done incrementally. Once the math is in place, it might not seem so inconceivable. The intimidation of trying to reach that large number gives way to confidence – the feeling that you could realize that objective by contributing a set amount per month over a period of years.

 Those discrete steps can make the goal seem less abstract. As you save and invest, you may make good progress toward the goal and attain milestones along the way. These milestones are affirmations, reinforcing that you are on a positive path and that you are paying yourself first. 

Additionally, the earlier you define a goal, the more time you have to try and attain it. Time is certainly your friend here. Say you want to invest and build up a retirement fund of $500,000 in 30 years. If you save $500 a month for three decades through a retirement account returning 7% annually, you will have $591,839 when that 30-year period ends. If you give yourself just 20 years to try and save $500,000 with the same time frame and rate of return, you may need to make monthly contributions of about $975. (To be precise, the math says that over two decades, monthly contributions of about $975 will leave you with $501,419.)1

When you save and invest with goals in mind, you make a commitment. From that commitment, a plan or strategy emerges. In contrast, others will save a little here, invest a little there, and hope for the best – but as the saying goes, hope is not a strategy.

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

  Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered  investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx [4/26/18]

The post Set Goals as You Save & Invest appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.

Contribute and play catch-up. This year’s standard contribution limit for an IRA (Roth or traditional) is $5,500; common employer-sponsored retirement plans have a 2018 contribution limit of $18,500. You should try, if at all possible, to meet those limits. In fact, starting in the year you turn 50, you have a chance to contribute even more: for you, the ceiling for annual IRA contributions is $6,500; the limit on yearly contributions to workplace retirement plans, $24,500.1

Look for low-fee options. Lower fees on your retirement savings accounts mean less of your invested assets going to management expenses. An account returning 6% per year over 25 years with an annual expense ratio of 0.5% could leave you with $30,000 more in savings than an account under similar conditions and time frame charging a 2.0% annual fee.2

Focus on determining the retirement income you will need. If you are behind on saving, you may be tempted to place your money into extremely risky and speculative investments – anything to make up for lost time. That may not work out well. Rather than risk big losses you have little time to recover from, save reasonably and talk to a financial professional about income investing. What investments could potentially produce recurring income to supplement your Social Security payments?

Consider where you could retire cheaply. When your retirement savings are less than you would prefer, this implies a compromise. Not necessarily a compromise of your dreams, but of your lifestyle. There are many areas of the country and the world that may allow you to retire with less financial pressure.

Think about retiring later. Every additional year you work is one less year of retirement to fund. Each year you refrain from drawing down your retirement accounts, you give them another year of potential growth and compounding – and compounding becomes more significant as those accounts grow larger. Working longer also lets you claim Social Security later, and that means bigger monthly retirement benefits for you.

Most members of Generation X need to save more for their futures. The median retirement savings balance for a Gen Xer, according to research from Allianz, is about $35,000. A recent survey from Comet Financial Intelligence found that 41% of Gen Xers had not yet begun to build their retirement funds. So, if you have not started or progressed much, you have company. Now is the time to plan your progress and follow through.3,4

Kurt Rohrs may be reached at (480) 812-8640 or kurtrohrs@SWRetire.com

Southwestern Retirement Planning Advisors, Inc.

3800 S. Alma School Road, Suite 123

Chandler, AZ 85248

www.SWRetire.com

   Registered Representative offering securities and advisory services through Independent Financial Group LLC,

a registered broker-dealer and registered  investment adviser. Member FINRA/SIPC

Southwestern Retirement Planning Advisors, Inc. is not affiliated with Independent Financial Group LLC

OSJ Branch: 4041 MacArthur Blvd. Ste. 240, Newport Beach, CA 92660

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – irs.gov/newsroom/irs-announces-2018-pension-plan-limitations-401k-contribution-limit-increases-to-18500-for-2018 [10/25/18]

2 – businessinsider.com/401k-fees-devastate-retirement-2017-5 [5/10/17]

3 – fool.com/retirement/2018/02/07/heres-what-gen-xers-have-saved-for-retirement.aspx [2/7/18]

4 – entrepreneur.com/article/309746 [3/2/18]

The post Catching Up on Retirement Saving appeared first on Southwestern Retirement Planning Advisors - Retirement Planning Chandler, AZ.