Axiom | Vol 283

Meet The Axiom®’s Guest Editor: Steve Dryer

I’m Steve Dryer, Annex Wealth Management’s Managing Director of Operations.

I believe I have one of the most engaging and interesting roles in all of Annex. I get to work with the teams that deliver our client service, financial planning, estate planning, tax planning, investment management, and a team responsible for data, analytics, and large projects. The teams I have the privilege to work with are made up of some of the most passionate, dedicated, and knowledgeable professionals I’ve been associated with throughout my 30+ year career in financial services. To me, that’s the power of Annex – the team of experts that serve in so many different ways, both seen and unseen. I hope the next time you visit one of our offices you can meet and appreciate some of the exceptional employees here at Annex. I know they’ll enjoy meeting you.

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A middling jobs report showed lower unemployment, but inflation concerns continue. How quickly will the Fed complete its taper? Annex Wealth Management’s Dave Spano and Derek Felske discuss.

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A recent study shows that due to the pandemic our attitudes about saving and being wealthy have changed. Over the course of the next several weeks, we’re going to ask our readers some questions about what that means.

Poll | Week 3: Which number best describes what you think it takes to be wealthy?

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Capital Gain/Loss Planning: Capital Gains Distributions; Tax Loss Harvesting 

In this week’s MoneyDo, we encourage you to take part in a key component of year-end wealth management – evaluating gains and losses.  

After the continued growth the market has experienced this year, you may discover that your holdings are in a different position than they were just a year ago. Despite the potential complexities, evaluating gains and losses should be part of your end-of-year MoneyDos.  

The gain and loss evaluation process has two critical components: 

  • Considering tax implications as you get ready to file taxes 
  • Reviewing the risk you are taking in your portfolio and considering adjustments, if needed 

When considering taxes, keep in mind that long-term capital gains are taxed differently than other types of income. Depending on your situation, long-term capital gains may be taxed at 0%, 15%, or 20%.  

For lower-income taxpayers, it’s possible to have some or all of these gains fall into the 0% capital gains tax rate. For higher income taxpayers, your gains may be taxed at the 15% or 20% rates. Additionally, higher income taxpayers may be faced with a 3.8% surtax on investment income. 

The end of the year is a great time to review what assets you hold and look at rebalancing your portfolio. When you do, consider your mix of assets and determine if they’re in line with your risk tolerance. It’s important to note that if you are on Medicare, you should be aware of increasing your income too much. There are certain income thresholds that can cause higher monthly Medicare premiums for you in a future year.  

It’s also important to look at the holding period of assets you’re selling. If you’re realizing gains on holdings you’ve owned for 365 days or less, the sale would be considered short-term. Short-term capital gains rates are generally less favorable, as they mirror that of your current ordinary income rates. 

For many newer investors, it takes some time to understand why or how a realized loss could be a tool in your financial toolbox. However, a tax loss can sometimes be used to reduce your tax liability. If your portfolio has realized gains, that could potentially bring you into a higher tax bracket. Realizing a loss can potentially reduce your tax bill.  

Things to consider before realizing losses: 

  • Your losses can offset other capital gains, to the extent you have them. Beyond that, up to $3,000 of losses can be used to offset ordinary income. Any remaining losses beyond that will generally get carried forward into future years. 
  • Ask yourself this: Do you already have suspended losses which you are carrying forward on your tax return? If so, you may not receive additional tax savings by realizing more losses now. 
  • Selling a security with a loss and then immediately buying it back may create an unintended consequence. You would need to wait 31 days before buying the security back. If you do not, the “wash sale” rule kicks in, preventing you from realizing and benefiting the tax loss created by the initial sale. 
  • Make sure to consider if you’d leave the funds in cash after realizing a loss, or if you’d be reinvesting the proceeds into a different type of security. 

If you’re worried about the tax implications of realizing gains and/or losses, be sure to review your projected 2021 income before executing any sales. Don’t hesitate to get in touch with us here at Annex Wealth Management. We stand ready to help in any way we can. 

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This week’s Ask Annex comes from Justine, who asks:

How can I find out how efficient a charity is with my donations? In other words, how much goes to the actual cause and how much goes to overhead or elsewhere? 

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We asked Annex Wealth Management’s Tom Berkholtz, CFP®️:

An important part of intelligent giving is determining what percentage of your donation goes directly to the cause. A website called Charity Navigator can help with this type of due diligence. It’s typically best to concentrate your giving to a small number of well-run charities that align with your values.  

Lastly, don’t hesitate to tell the charity about your long-term giving plans. A partnership can be formed moving forward, which could be of great benefit to both of you. There are a variety of Financial & Tax planning strategies when it comes to charitable giving, so consult your financial advisor to determine the most efficient way to give back. 

– Tom Berkholtz, CFP®️ | Financial Planning Specialist

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My favorite part of the Axiom is the DYADT (Does Your Advisor Do This?) where we highlight topics and concepts that we bring to our clients that other firms either can’t or won’t deliver. For me, these articles amplify what “Know The Difference” is all about.

– Guest Editor: Steve Dryer | Managing Director of Operations
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Can Your Advisor Help Your Business Set Up Or Improve Their 401(k)?

Setting up a 401(k) program for your team? Annex Wealth Management’s Director of Retirement Plan Services, Tom Parks, AIF®, CRPS™ discusses the important factors to consider first.

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KNOW THE DIFFERENCE MINUTE:

KNOW THE DIFFERENCE MINUTE:

ANNEX RADIO

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Annex Wealth Management provides free workshops, open to the public, on key wealth management topics.

Check back soon for new events!Missed one of our events? Watch it HERE.

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