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Get Ahead With Tax Planning Strategies for Next Year

Are you hunting for last minute ideas and strategies to reduce your tax bill? If so, consider spending that time preparing to reduce your tax bill for next year. It will be a lot more productive to take steps now that could reduce the tax bill for 2016 than to trying to hunt for some donation receipt. Here are a few strategies to consider going forward:

Get a handle on your income tax brackets: If you convert a portion of your IRA into a Roth, or you periodically cash in savings bonds, or if you have a taxable investment account or you can control when you recognize income, it’s critical that you understand your income tax bracket thresholds and plan throughout the year. Recognizing income (through a conversion or sale) can bump you up into a higher tax bracket and you end up paying more in taxes. Sometimes that tax can be steep and costly, affecting your income taxes, your social security taxation, and even your Medicare premiums!

Tax Loss Harvesting: If you have a taxable account, you are well aware of how frustrating it is to own an investment with a huge unrealized gain and don’t want to sell it because of the tax it will generate. The solution is to sell it in coordination with one or several investments that have underperformed. The gain and loss can offset each other. 2015 was a particularly great year to do tax loss harvesting, but we won’t be that lucky in the future.

Gifting Strategies: If you’re charitably inclined, consider giving gifts of appreciated stock. You get a tax deduction AND avoid paying capital gains on the stock. If you’re over 70.5, you can make direct charitable contributions from your IRA which can offset your annual Required Minimum Distribution.

A Problem In My Industry and What I’m Doing To Fix It

There is a growing problem among Financial Advisors and Financial Planners – one that many industry veterans don’t want to talk about. Just like baby-boomers, most advisors are approaching retirement and may begin slowing down soon. More than half of all advisors are over the age of 50 and about a third of all advisors will retire in less than ten years. (source)

The concern is that advisors will be retiring in droves just as their clients enter the most difficult stage of their financial life – retirement. There couldn’t be a worse time to start looking for a new financial advisor. Finding a new financial advisor to guide you through the complicated retirement process can be time intensive and stressful especially when you have to make important decisions in the near future.

Fortunately for our clients, we operate as a team. I have been working closely with my father for years now and we have several staff members that work behind the scenes to help clients.

But our current approach is not the norm. To complicate matters, younger advisors are no longer entering the business like they once did. The training programs at many of the big firms have been scaled back significantly.

Over the last few months, I have worked with the local chapter of the Financial Planning Association to launch a NexGen community. It’s a group for financial advisors and financial planners under the age of 40 in the Hartford region to meet and learn from each other. The purpose of the group is to foster involvement of younger advisors and to improve their skill sets and to match younger advisors with older advisors.

Based on attendance from the first event – we’re on to something.

Learn to Be Brilliant & Generate Good Ideas Consistently

If you’re in a field that requires creativity, check out The Accidental Creative. For me, no two client situations are ever the same. And as a result the strategies are customized every time. The folks behind The Accidental Creative put out some great information that help me improve the way I develop and communicate strategies for my clients.

Their premise is refreshing: They want to help people be more creative in jobs that you and I don’t normally expect to require creativity. And they believe that creativity can be taught so anyone can then think outside the box (if they apply themselves).

If you’re moving up in your career or working part time or volunteer, go through their site and listen to a podcast or two. It’s a great podcast to listen to on the ride home from work.

The Experts And Their Conflicting Predictions

It’s become comical to see and watch the supposed experts lay out such convincing rationales explaining what the future holds. In the reading of the tea leaves, some are seeing some pretty dark days ahead, while others think all of the market volatility is a normal correction. This became especially clear when I recently attended the InsideETF conference in Florida. None of the economists and experts were wishy-washy – They were either very bullish or very bearish. Their charts and arguments were very strong and they would even take shots at each other to try to poke holes in their arguments. It was like watching a presidential debate!

The final speaker, Liz Ann Sonders of Schwab, put up a chart that really stood out to me:
Investor Sentiment

Liz asked “Have investors ever felt thrilled or Euphoric about the performance of the market at any point since the depths of the 2008 and 2009 recession? The answer is “No”. Despite some pretty impressive rates of return, investors have remained in the Hope and Optimism stage (maybe excitement). Every time the market corrects, investors are quick to move to safety. That’s a good thing! When the market becomes so hot that investors expect it to go up, then a problem is about to occur.

If you want to read the rest of her points, here is a good summary