A SAVVY WAY YOU CAN GIVE MORE, PAY LESS IN TAXES
Under the Tax Cuts and Jobs Act of 2017 (TCJA), the standard deduction available to taxpayers increased substantially. However, for taxpayers who choose to itemize their deductions, TCJA limited or discontinued certain previously deductible expenses, such as state and local income, sales, and property taxes, and charitable deductions. One work-around is to accelerate your charitable giving using a donor-advised fund.
Potential advantages of using a donor-advised fund
This hypothetical example assumes that the persons involved are single; that they take the standard deduction for federal income taxes, except in the first year for the person who donates $50,000 to a donor-advised fund; and that the money in the donor-advised fund grows at a projected rate of 6% a year.¹ Each person then makes a $10,000 charitable donation a year for the first four years. However, the person who initially contributed to the donor-advised fund makes a $16,753 charitable donation in the fifth year as a result of the fund’s capital appreciation. (Any taxes saved on capital gains realized by donating appreciated securities or property are in addition to any tax savings shown below. Also, this hypothetical assumes 2021’s standard deduction, tax rate, and tax brackets remain the same over the whole period.)
REMEMBER: RECOVERIES HAVE REWARDED PATIENCE
If you’ve ever taken an economics course, you might remember this basic principle: Economies and financial markets, such as the stock and bond markets, move in cycles. That is, you can count on markets to experience lows, when prices fall, and peaks, when prices surge. While no one has perfected the science of knowing exactly when those lows and highs will occur, you know the financial markets (and most global economies) will eventually come back around. This underscores the importance of maintaining a diversified, properly balanced portfolio (versus a highly concentrated, non-diversified one), which can more effectively withstand the shock of a market downturn. Perhaps more important, the inevitability of market cycles illustrates why reactive selling amid a downturn is harmful in the long run.
SMART THINGS TO DO (THAT MANY WON’T) IN A DOWN MARKET
Markets move based on numerous variables that no one person can meaningfully control or even fully monitor. And when stock prices falter, the resulting steady drumbeat of negative news reports can drive many people to flee the markets out of fear (and miss out on potential gains as financial markets regain their strength).
VOLATILE MARKETS: DON’T RELY ON HEADLINES FOR GUIDANCE ON WHEN TO INVEST
Falling markets and drastic headlines can tempt individuals to abandon their long-term investing plans. Their thinking might go something like, let’s wait until it’s over, hoping to catch the market at its lowest point before buying in. Or in rising markets, maybe they seek to sell most of their holdings near the peak. However, timing the market is essentially an impossible task . . .
WHERE IS YOUR COMFORT ZONE? RANGE OF CALENDAR-YEAR RETURNS FOR VARIOUS ASSET ALLOCATIONS, 1926–2020
MAKING SENSE OF MEDICARE'S PARTS
It’s easy to get a bit mixed up by the many parts and features of Medicare. This chart lets you see, at a glance, the major coverage options, called parts, and some of their more significant aspects. Use it to help you think about what level and combination of coverage suits you the best.
HOW REBALANCING CAN HELP REDUCE RISK
Volatile financial markets, events in your life, and even regular investment reviews can prompt you to wonder why we rebalance your portfolio. After all, if your strongest-performing assets account for a larger portion of your holdings, why not let them ride?