KF Update – Year End Planning

4 Minute Read

Good morning,

I hope this email finds you and your families well, and you had a wonderful Thanksgiving.

With the dust mostly settled around the election (except for an incredibly close local house seat), I thought we could shift focus to some year end planning items that could be helpful for clients to consider.

One popular planning tool that is available to clients is something called a Roth Conversion.  This means converting pre-tax money (within an IRA or 401k) to Roth.  The tax on the conversion would be paid now, but all Roth money including earnings is completely tax free going forward.  

Why would somebody do this, or why would it make sense?  If you are in a lower tax bracket now, which many retirees are, it could make sense to lock in these lower tax rates now.  Additionally, pre-tax monies are required to be distributed starting at age 72 (RMDs) to the tune of 4-5% per year to start.  At that point, you have less control over which tax bracket those distributions fall into.

We have our federal income tax brackets for 2020 below which is a tiered system.  If you are Married Filing Jointly (MFJ), your first $19,750 of income is taxed at 10%, between $19,750 to $80,250 at 12%, and then income above $80,250 jumps up to 22%!

For example, let’s say your taxable income for 2020 will be $70,000.  It might make sense to convert $10,250 from pre-tax to Roth, and “Fill Up The Bracket.”  This strategy can be done each year leading up to age 72, as a way to take more control over how your pre-tax monies are taxed.  This could be especially beneficial if you believe taxes will increase in the future.

Additionally, if an IRA balance is large, those Required Minimum Distributions (RMDs) could put you into IRMAA surcharge range shown below.  These are additional premiums retirees would have to pay to Medicare if their income is high in retirement.

One of our newest pieces of financial planning software allows us to do a comprehensive tax analysis for clients, including modeling different scenarios and tax planning tips.  Please contact the office if you would like us to provide you with a comprehensive tax analysis.  As with all of our financial planning tools, there is no additional costs, all included in our service offering to clients.

Here is a list of other considerations for year end planning:

  • Save your charitable donation receipts, you can deduct $300 as an above the line deduction for 2020.
  • Required Minimum Distributions (RMDs) were suspended in 2020, but will be reinstated for 2021.  If you had recently turned 72 or will in 2021, it could be beneficial to start planning for those distributions.  You can take them monthly, quarterly, lump sum, etc.
  • If gifting money, the annual exclusion is $15,000 per year, tax free.
  • Reviewing your investment allocations to ensure they still align with goals, time horizon, and risk tolerance.
  • Can you give yourself a “Raise for Retirement” in 2021, increasing contributions to IRAs and/or company sponsored retirement plans.
  • Review of estate planning documents and beneficiary designations to ensure they are up to date.
  • Are you eligible to contribute to an HSA, and if so, can you max those out for 2020?
  • If you have recently had a child, does staring a 529 make sense, and more importantly, do you have adequate life insurance coverage?
  • Qualified Charitable Distributions – If you will be taking RMDs in 2021, you can direct part of the distribution to a qualified charity.  Why do this?  Because unless you itemize, and very few people can, charitable contributions cannot be deducted from taxable income.  By sending money from your pre-tax IRA directly to your qualified charity of choice, your charitable donation can lower your taxable income.

The year 2020 has been difficult for all of us, to say the least.  Looking at the glass half full, we have some of the most amazing medical professionals and scientists in the world, working tirelessly on new treatments, the vaccine itself, and its distribution.  We are encouraged by the resiliency of the American people and the small businesses who are adapting to a new normal, and the bounce back in equity markets from one of the swiftest, most dramatic declines in its history.  While we have no idea what 2021 will hold, we are encouraged by these developments.

If you have any questions at all, or would like to schedule a meeting you can do so utilizing the button below or simply calling our office.  We wish you and your families a wonderful, safe, and healthy holiday season and look forward to a new year!

Best,
Clint

KF Update – Charitable Giving

4 Minute Read

Strategies around charitable giving have evolved since the updates in the most recent tax law, specifically changes around the standard deduction. Far fewer people have the ability to itemize and take a tax deduction for their charitable gifts. That said, there are ways to utilize retirement accounts and gifting strategies to be charitable in a tax efficient manner.

If you are over 70.5, you can make what is called a Qualified Charitable Distribution to the qualified charity of your choice. As long as the money goes directly from a Pre-Tax IRA to the charity, you will not have to pay taxes on the distribution. If you are over 72, this distribution can be counted towards your Required Minimum Distribution.

As part of the 2020 CARES Act, individuals can now take a $300 above the line tax deduction for charitable gifts, so be sure to save those receipts!

Below is a detailed checklist that you can go through to develop a gifting strategy and/or learn about ways to make charitable donations in a tax efficient manner. If you have any questions on this checklist, or would like to create a strategy, please contact the office and we will be glad to help with that process.

We wish you and your families a wonderful, healthy, and safe holiday season!

KF Update – Election Thoughts

4 Minute Read

Good Evening,

I hope this email finds you and your families well, and you had a wonderful Fall season thus far!

First, I wanted to apologize for the delay in getting out what are usually my monthly emails to clients.  We have been very busy revamping our entire technology infrastructure, digesting all things Covid related to investments/financial planning, and preparing for both the end of the year, and 2021. 

I will be sending out a separate email in the near future with somewhat of a ‘End of Year Financial Planning’ checklist along with the tools we have available to clients.

With that said, one of the most contentious elections in recent memory is just a week away.  I would like to take this opportunity to share some of my thoughts, as well as how markets have reacted in past election years.  

In 2005, I started my career in financial planning, and got my first cell phone!  I remember learning how to text using the three letters above the numbers, and the first time I could read my email directly from my cell phone, the technology at the time was incredible.

If we look back over these past 15 years, so much has changed, particularly the way we receive news and information.  The independent newspaper industry is largely shrinking, replaced by 24 hour cable news networks and social media. 

The current business model of delivering news seems to have become more about playing on our emotions, and less on delivering fact based information for us to form our own opinions.  This is particularly true when the news reports on the daily moves of the stock market, potential volatility around a presidential election, or any other economic event for that matter.

A volatile day(s) in the markets is amplified fifty fold in 2020 versus years ago.  We cannot get away from it by simply not opening up our monthly investment statement.  Any semi-newsworthy economic event leads to hours of analysis, opinions, and predictions both ways of how the market will react. 

Now more than ever it is incredibly difficult to ignore the noise and just “Ride It Out” as we say.  But, as this most recent downturn proved once again, as difficult as it can be, it remains the most prudent strategy for long-term investing success.

As for the presidential election, let’s take a look at how markets have reacted over the past 100 years.  The below graphic is the growth of $1 starting in 1926 through 2019.  While the short-term is unpredictable, the general trend of the markets are upward, regardless of the party and overall economic conditions.

As to what the markets think will happen, interestingly, the S&P 500 performance in the 3 months leading up to the election has correctly predicted the presidential winner 20 of the last 23 elections.  If the S&P 500 was positive in the 3 months leading up the election, the incumbent party wins the White House, and the opposite if the S&P 500 is negative in those three months.  Here is the graphic:

The S&P 500 is currently up around 5% over the past 3 months with 5 trading days left until the election which bodes well for our current president.  That said, most national polls and odds makers show our current president as an large underdog with the exception our local pollster, Mr. John Zogby, who has the race within 2 points.  It’s anybody’s guess at this point how all of this plays out.

We certainly understand the anxiety with this election, the different ways the three branches of our federal government could be shaped starting in 2021, and the various ways the markets could react on a short-term basis.  History tells us that regardless of the makeup of the three branches, stocks follow an upward trend line over longer periods of time.

If you are interested in scheduling a review meeting to review your portfolio, or just have a quick question you can schedule a time for us to meet using the blue button below.  It links directly to my calendar and you can find a time that is most convenient for you.  You can always call the office also at (315) 801-9028.  I look forward to talking, and hope you have a great rest of what has been a beautiful Fall season.

Best,
Clint

KF Update – Reopening

3 Minute Read

Good morning,

I hope this email finds you and your families well. CNY has officially entered phase two reopening which means Kane Financial can begin in-person client meetings! 

The state health department has provided required guidelines to businesses that are reopening, which thanks to Lyndsey’s hard work, have been 100% implemented at our office.  We are taking every safety measure and precaution necessary so that our clients can feel comfortable coming to our office for meetings.

In terms of the markets, our economy, and general financial planning, here is a brief list of recent FAQs:

How are the markets doing?
Following the fastest stock decline in our history (34% in just under a month), markets have rallied by 36% from March lows, all while some of the worst news was coming out.  The downturn provided several excellent buying opportunities within client accounts.

Will the Stock Market go back down?
It could, and if it does, we will again add to long equity positions in client portfolios.  That said, this rally has been very encouraging.  Markets are forward looking economic indicators, taking in current known information, and projecting what our economy will look like 6-9 months down the road.  We do not quite know the extent of economic damage the shutdowns have caused, and that unknown is still hanging out there for markets to digest.

What else should we be thinking about for the rest of 2020?

  • Required minimum distributions from pre-tax IRAs have been moved to age 72, and suspended for 2020.
  • Charity donations up to $300 have been added as a top line deduction for tax purposes for 2020.
  • The SECURE Act passed in late 2019 making Roth IRAs even more attractive.
  • Kane Financial now offers tax planning for clients (no extra cost) and can run tax scenario analysis for 2020.
  • If you have earned income, you can continue IRA contributions past age 70.5.
  • Your stimulus check is not taxable, it is essentially a tax credit.
  • IRA contributions for 2019 can be made up until July 15th, 2020.
  • For small business owners, ask your accountant about tax planning for 2020 as there have been numerous extension, deferment, and forgiveness programs that became available during the pandemic.

Finally, since we can meet with clients once again we would love to set up a review meeting with you.  After the market volatility we have experienced, now could be a great time to re-evaluate risk tolerance and portfolio allocations. 

Please feel free to schedule a meeting using the link on our website, it goes directly to my calendar where you can indicate the type of meeting, and the date/time that is most convenient for you.

I look forward to hearing from you, if you have any questions or concerns at all, please do not hesitate to contact the office.

Best,
Clint

Kane Financial Update – April 5th, 2020

3 Minute Read

I hope this email finds you well.  I wanted to send along a brief update with some business information, and the recent stimulus program approved by congress.

Kane Financial continues to be fully operational, with our usual hours of 8am – 5pm Monday through Friday, and Saturday 8am – 1pm.  We are continuing to meet with clients regularly, and encourage you to schedule a meeting at your convenience, either just to catch up and go through some questions, or go through a comprehensive client review meeting.

We have moved all in-person meetings to phone and video conference for the month of April.  The link below goes directly to my calendar, where you can schedule a meeting and indicate if you would like to speak over the phone, Google Meet, or Zoom Video Conference.

Click Here to Schedule a Meeting

As for the stimulus package recently approved, here is a high level overview of what we know so far:

Stimulus Checks
Expect a check direct deposited or in the mail from the US treasury in the coming month.  The $1,200 amount for single taxpayers starts to phase out at $75,000 of adjusted gross income, and the $2,400 amount for married taxpayers begins to phase out at $150,000 of adjusted gross income.  This is based off of 2018 taxes, unless you have already filed for 2019.

Unemployment Benefits
These benefits have been expanded to include an additional $600 from the federal government, on top of the state unemployment one would qualify for.  Additionally, this includes those previously excluded from qualifying, such as sole proprietors and independent contractors.

Small Businesses
The Paycheck Protection Program allows small businesses under 500 employees to apply for a loan in the amount of 2.5 times the business’s average monthly payroll expense from 2019.  If the business uses this money to retain employees and pay essential services such as rent and utilities, the entirety of the loan can be forgiven, and act as a tax free grant.

The EIDL is a $10,000 loan advance to businesses currently experiencing temporary difficulties due to COVID-19.  This loan does need to be paid back, but provides flexible and generous repayment terms.

Required Minimum Distributions
Those over 72 who previously were required to take Required Minimum Distributions from Pre-tax retirement accounts, can skip those distributions for 2020.  If you already took the distribution, there could be ways to reverse this and get the money back into your retirement account, if you wish to do so.

Charitable Contributions
You can now donate up to $300 to charities, and receive the tax deduction, even if you do not itemize and you take the standard deduction.

Student Loans
Federal student loan repayments have been suspended until September 30th, 2020 and will accrue no additional interest during this time.

Markets and Economy
The markets have stabilized over the past couple of weeks, and as of this writing, the S&P 500 index has recovered by over 10% since its lows in March.

April is going to be a difficult month, and we are going to continue to see scary headlines around the spread of the virus, job losses, and the damage our economy is experiencing.

We are also going to see incredible stories about our heroic healthcare professionals at the front lines, businesses stepping up to fill the need for medical supplies, new treatments that are showing promise, innovative testing strategies, progress in the development of a vaccine, and the spirit of the American people on full display.

We will continue to communicate on a regular basis, and thank you for the trust you have placed in Kane Financial.  If you have any questions or concerns, please do not hesitate to contact the office and/or schedule a meeting.

Best,

Clint