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What’s Happening?

The world’s stock markets have been very volatile in the 4th quarter as investors become more concerned that a trade war will break out between the US and China.  The 90-day truce called at the recent G20 meeting was followed by tweets from the President that seemed to indicate he was still committed to tariffs.  That was followed by the arrest of the CFO of Huawei, a Chinese tech company that makes smartphones and telecommunications equipment.  All of which stokes greater concern that the trade war may continue.  The US and China are the two largest economies in the world, so a trade war between the two could have ripple effects throughout the global economy.  It remains to be seen whether this is simply posturing before a trade deal is made or something with longer term effects. Meanwhile, this has caused the stock market indices to decline significantly from their highs...

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Build Your Own Tax Cut for 2018

Build your own tax cuts in 2018

The federal income tax cuts that were approved last year contained only modest decreases for average American taxpayers. You can work on your own tax cut for this year by taking some easy steps before the end of December. Here are some suggestions: Max out on your employer retirement plan contribution: You can ask your employer at any time to temporarily increase your contribution. If your regular payroll withholding is not at the maximum level, consider asking for a larger deduction for the rest of the year. Every dollar you put away reduces your 2018 income tax bill. If possible, contribute the maximum. On a 401k plan, you can contribute up to $18,500 this year. If you are age 50 or older, the maximum is $24,500. No 401k? Max the IRA: If you don’t have an employer plan and you qualify for a tax-deductible IRA contribution, try to make the...

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Some States Tax Pre-College 529 Plan Withdrawals

Federal tax law changes made last year now allow state-sponsored college savings plan owners to withdraw money tax-free to pay for up to $10,000 in kindergarten through 12th-grade educational expenses each year. Previously only withdrawals for college education were tax-free. However, not all states allow these withdrawals. Some 20 states will allow you to make the withdrawals tax-free (see the list here). But many other states not only will tax the earnings on these withdrawals, but will seek to recover the value of tax deductions gained when contributions were made. New York is one of the largest states to tax pre-college 529 plan withdrawals. Its college savings plan recently announced that “it appears that K-12 distributions would not be considered qualified distributions under New York statutes and would require the recapture of any New York State tax benefits that accrued on contributions.” Another large state – California – said it would also levy...

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Steven Elwell Talks Advisor Shortages on Schwab Panel

Sitting on a panel of experts that included Charles Schwab's head of Advisor Services, Bernie Clark,  Steven Elwell, CFP® discussed the looming shortage of advisors in the financial services industry.  The panel took place at Schwab's Impact® 2018 annual conference, which attracts over 5,000 advisors, vendors and financial services experts.  Financial Planning Magazine reported on the discussion in this story: Click Here...

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CHARITABLE GIVING IN THE WAKE OF TAX REFORM – PART 3

If you missed either of the first two parts of this three part series on tax-efficient giving strategies, check them out here:  Part 1  Part 2 As mentioned in the first two parts of this series, recent tax reform is significantly reducing the number of people who will recognize a tax benefit when making charitable contributions in 2018 and beyond.  This is because many people will find that the now-higher standard deduction will be greater than the sum of their now-limited itemized deductions.  If this sounds like you, keep reading to learn how a donor advised fund may help you recognize a tax benefit when giving to your favorite charity. A donor advised fund account is a simple, tax-smart investment solution for charitable giving.  Despite its name, it’s not something that only those featured on “Lifestyles of the Rich and Famous” have access to.  This is a tool that middle class America...

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Dow drops 1,400 points in two days? Ho-hum

The stock market plunges over two days! Volatility ripples around the world! Do rising interest rates signal the end of bull market? Pardon me if I yawn. After 20 years in the investment business and 14 years as a financial reporter at a daily newspaper I get bored with breathless news reports of impending catastrophe every time the stock market has a normal and expected hiccup.  I’m sorry, but a 1,400-point decline in the Dow Jones Industrial Average just doesn’t get my blood flowing anymore. This week’s decline in stocks shouldn’t be upsetting to an experienced, focused investor. One reason is that 1,000 Dow points ain’t what they used to be, because the index has reached almost 27,000 in the past year. The higher it gets, the less 1,000 points means in percentage terms. This week’s drop amounted to a 5.2% decline. Compare that to a real decline, like the Oct. 19, 1987...

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Context Always Matters

Yesterday, Buffalo hit a record high temperature of 82 degrees. Let’s say I told a random person who didn’t know where I live that the temperature in my city was 82 degrees on a particular day. They’d probably say that was a nice day. Now what if I told them that that particular day also happened to be in the middle of October? They’d be a little more impressed. They might even assume I live somewhere warm like Florida. Lastly, imagine if I told them it was 82 degrees in the middle of October in Buffalo, NY. Most people would say that was a GREAT day, given that the average high temperature in Buffalo on October 9th is 62 degrees. Context always matters when comparing and evaluating. This is especially important in investing. Your co-worker’s 401k is up 16% for the year and yours is only up 2%? Good for them, but chances are...

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Play the Social Security Waiting Game and Improve Your Retirement

Social Security gives you a broad range of options: Take the monthly payment as early as age 62, wait until “full” retirement age (age 66 for those retiring in the next few years), or wait until as late as age 70 to claim your benefit. The factor that makes this decision tough is the size of the benefit: Take it early and it will be reduced by as much as 25% from your full retirement age benefit (again, for most retirees now, at age 66). Delay the benefit until age 70 and get a payment that is 76% higher than the age 62 benefit. A good part of the claiming decision depends on your definition of the purpose of Social Security. Some workers see it as extra play money that is a reward for living to age 62. Others see it as an endangered benefit that could be reduced or eliminated in...

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Charitable Giving in the Wake of Tax Reform – Part 2

If you missed the first installment of my three-part series on efficient giving strategies, you can read it here:  Part 1.  Once you are up-to-speed, keep reading here to learn about an absolute home run of a giving strategy for those who have an IRA and are at least 70 ½ years old. As mentioned in Part 1 of this series, recent tax reform is going to significantly reduce the number of people that itemize their tax deductions.  This means that many people who donate money to qualified charities will no longer be able to recognize the tax benefit of their gift.  If you fall into this camp, have an IRA, and are at least age 70.5, then you should consider the advantages of a Qualified Charitable Distribution (QCD). A QCD is achieved when you distribute money from your IRA or inherited IRA to a public charity.  The donor must be at least...

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