Dream a Little Dream: Know where you want to go

July 10, 2012

People often think defining an investment strategy is the first step in creating a solid financial plan. Slow down. Before you even begin to gather all the information you’ll need to form an investment strategy, sit down on the porch or patio or in front of the fireplace (with your spouse or partner if you have one) and let your mind roam.

What do you really want from life? If you could do anything you want, what would you do? Don’t put financial restrictions on yourself now. Dream. Stretch a little. Once you have that dream defined and you know roughly where you want to go, you can begin to determine what role a financial plan can have in helping you live that dream. 

A good investment strategy begins by identifying your specific individual goals and the time you have to achieve them. Those highly personal decisions, very often driven by your love of others, will suggest your strategy. Your strategy may include shorter- and longer-term objectives.

Are you investing to buy a house, pay for college or to retire with sufficient income to support the lifestyle you desire? How much money will you want for each objective? When will you need it? How can you get there? Will you have to make trade-offs to achieve those goals? Which take the highest priority?

The answers to all of those questions will help you determine your individual strategy. Without that strategy it is nearly impossible to know how to invest.

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Top Ten Year End Tax Ideas – Part One

December 23, 2010

1. Meet with your financial advisor or tax professional. They have a much better feel for your personal situation and can provide strategies for your circumstances. The following ideas, while they can provide significant tax benefits, may or may not make sense in your personal situation. There are so many variables to address that not all of the details can be covered in this article so remember to please consult a professional to maximize these ideas.

2. Be charitable. Make a donation to your favorite charity by December 31. If your charity accepts credit cards, you could charge your donation before year-end to have it count for this year’s tax return.

3. Bunch your itemized deductions. If you are close to being able to “itemize deductions,” but not quite yet over the standard deduction, you might want to make extra charitable deductions, pay state or property taxes, pay January’s mortgage payment or medical expenses in December 2010 to take advantage of tax benefits without doing a whole lot of things differently, just timing your deductions to maximize your tax benefits.

4. Buy something. If you were planning on it anyway, make your purchase in December 2010 instead of January 2011. If you own a business, you should think about purchasing equipment or taking an extra trip to the office supply store to get more deductions this year.

5. Take some gains. Currently, long-term capital gains rates are at historically low rates of zero to 15 percent. It is likely these rates will go up in the future, so it might be beneficial to take advantage of what is currently available.

These are simply brief overviews of some of the tax items that you should not only be thinking about, but also trying to take advantage of. There are many favorable tax provisions that will only be in place for a short while. Make sure to call your financial advisor.


Your Year End Financial Checkup – Part One

December 16, 2010

As 2010 comes to an end and 2011 gets underway, it’s a great time for a financial check-up and review of your financial situation. Following are some items to consider:

Take a look at your current budget and savings plan and make adjustments as necessary.

Review current IRS Guidelines, such as contributions to your employer retirement plans and other retirement accounts. The maximum contribution to a 401(k), 403(b) or 457 Plan in 2010 and 2011 is $16,500 and taxpayers age 50 and older may make “catch-up” contributions of an additional $5,500. The maximum contribution to a SIMPLE IRA Plan in 2010 2011 is $11,500 with a “catch-up” contribution of $2,500 for taxpayers age 50 and older. The maximum contribution to Traditional and Roth IRAs is $5,000 in 2010 and 2011, contributions are subject to eligibility requirement based on Adjusted Gross Income. Taxpayers age 50 and older may make “catch-up” contributions to Traditional and Roth IRAs of $1,000. Please note: You have until April 15th, 2011 to make a year 2010 contribution to your IRA or Roth IRA if you qualify.


Mid-Term Market Moves – Part 1

October 12, 2010

So far, the stock market performance in 2010 has tracked the typical pattern for U.S. stocks in mid-term election years, albeit with a bit more than the usual volatility. The path is usually range-bound and volatile, but capped by a strong fourth quarter rally averaging about 8%.

The market’s reaction to mid-term elections has nearly always been positive, even when the balance of power has shifted in one or both houses of Congress—as we expect this year with the Republicans having a good chance of taking the House. In four of the five years that mid-term elections resulted in a change in power (2006, when Democrats took the House and Senate; 2002, when Republicans took the Senate; 1986, when Democrats took the Senate; and 1954, when Democrats took the House), fourth-quarter returns were positive, much like those in mid-term election years when no change in power took place.


Fourth Quarter is Key

September 28, 2010

The fourth quarter may hold the key to the year for stock market performance. The restoration of a balance between the parties in Washington may be welcomed by markets. The market’s reaction to mid-term elections has nearly always been positive, even when the balance of power has shifted in one or both houses of Congress — as we expect this year with the Republicans having a good chance of taking the House on November 2. The average gain for the S&P 500 in the fourth quarter of a mid-term election year is a solid 8% (see the Weekly Market Commentary from August 2 entitled “Mid-Term Market Moves” for more information). This mid-quarter policy driver may be potent enough to turn sentiment around and produce gains for the year in line with our forecast for modest single-digit gains.


Catalysts on the Horizon – Part 3

September 23, 2010

5. The fourth quarter of mid-term election years is almost always favorable for stocks. The market’s reaction to mid-term elections, as uncertainty fades, has almost always been positive, with fourth quarter gains averaging 8% in mid-term election years. So far, the stock market performance in 2010 has tracked the typical pattern for U.S. stocks in mid-term election years, albeit with a bit more than the usual volatility.

6. If history is any guide, the disappointingly soft economic data over the past few months may soon begin to firm. Looking back over the past 60 years, about one year after the start of every recovery a soft spot emerges. Some closely watched indicators of growth are likely to be near the bottom of their typical soft spot-driven decline and poised for a rebound. As the data begins to firm later this year, the typical pattern of recovery may continue to unfold as it did in the post-recession recovery years of 2003 and 2004 when a late year rally in 2004 resulted in gains for the year.
Unfortunately, all of these potential catalysts are a month or more away while the economic data continues to disappoint.

The volatility that has defined this year is likely to continue with ongoing losses to be recouped by a late-year rally. In the meantime, we continue to find yield-producing investments attractive.


Vacation Properties and Income – Part 1

September 9, 2010

If you have a vacation home, you’re already aware of the enjoyment it provides and the benefits it can offer at tax time. But you may not be aware of how vacation property can be used to generate income in retirement or how it can play into an estate plan. In fact, vacation properties offer retirees a number of different options in managing their finances and estate.
Vacation property may be used to generate income in several different ways. The first, and most obvious, is renting it. The IRS allows you to deduct mortgage interest on your primary residence and one additional property up to a limit of $1 million in combined mortgage debt for mortgages taken out after 1987. Current tax rules also allow you to rent out a second home for up to 14 days per year without having to report the rent as income. If you rent for more than 14 days, the home is considered investment property, and rent must be reported as income. Converting the property to an investment property, however, allows you to deduct rental expenses, such as insurance and utilities, if you have a net profit on the property (deductions are limited if you report a loss). You can still use an income-producing property for personal use while maintaining your tax advantages — but only for the greater of 14 days or 10 percent of the total days it is rented. Maintenance days do not count as personal-use days, but use by in-laws or other part-owners does, even if rent is charged.