I’m often surprised by the level of skepticism I hear regarding 529 college savings plans.
The 529 plan allows for easy investment choices, tax free growth and tax-free distributions to pay for college. With an early start to funding, this can create tens of thousands in savings for a family over the many years leading up to college.
So many of my clients express a huge desire to save for their kids’ college educations at the expense of their own retirement. I’ve also seen parents mortgage their home and liquidate portfolios to make tuition payments. As soon as an acceptance letter arrives from a target school (or any school, sometimes)—the examination of cost is almost absent from further action. It becomes “pay the bill by any means necessary.”
In a prior article I explained how advisors add value to investment accounts, but the value of financial advice extends well beyond investments. Worthwhile financial advice professionals should seek to grow and protect a client’s total net worth—rather than simply maximize investment return on liquid assets.
A few studies have examined the value of financial advisors, from an investment standpoint. They all seem to conclude the same thing—that the value of a financial advisor is not in finding the best investments but, rather, designing a basic, workable plan, and more importantly, serving as an accountability partner and barrier from making a big emotional mistake.
We showed that the 4% rule is an insufficient guide for retirement withdrawals. Here are some strategies that can help retirees make their money last.
Per following the 4% rule, you've dutifully saved over your working years and are now ready to retire. You plan to withdraw 4% annually in retirement.
But the 4% rule alone will not guide you to retirement success. In this article I outline a few shortfalls with this famous rule-of-thumb, and why you need to be weary of them well before your actual retirement.
Roth accounts are the holy grail of retirement savings. While taxed in the year of contribution, once in a Roth, funds are tax free forever. No tax on investment, or withdrawals, or even distributions to your kids when you’re gone and they’re fighting over your estate.
But high earners face an uphill battle in funding Roth accounts. Direct contributions to a Roth IRA aren’t allowed for households earning more than $203,000. Here are few workarounds.....
Arbitrage is a fancy word used in finance conversations by people that really want to seem smart.
Today, I’m excited to be one of those people.
Roth conversions during low-income years can be a great way to set money free forever at a reduced tax rate. This strategy works well for those that have accumulated a high balance in traditional IRA or 401(k) through pre-tax contributions, and will have a low-income year because of a decision to retire, start a business, or become an instagram life coach.
Why high-earners should own a "personalized ETF" and consistently sell loss positions to boost after tax returns.
At the end of every year, take a look at your portfolio and sell whatever is "down" to capture a tax loss. If you still like the investment, buy it back after thirty days. If not, buy something else.
This annual exercise can create huge value over several years of investing.
After an IPO, employees that hold equity should sell their shares and avoid the urge to "let it ride"...
Early stage employees have a unique opportunity to place their future economic gains into preferential tax classifications. It just takes a little effort and some cash.
Equity compensation is a broad category of various ownership grants given to employees, founders and investors throughout a company’s lifecycle. If managed properly, equity compensation can provide an economic windfall that turbo charges a wealth plan.
A little discussed provision of the Tax Cuts and Jobs Act of 2017 allows for investors to invest taxable capital gains directly into an “Opportunity Fund” and defer paying taxes. There is a 10% and 15% basis increase after holding the Opportunity Fund for five and seven years, respectively. Any gains on Opportunity Fund investments are tax free if there is a holding period of ten years or longer.
Using good judgment to make smart decisions is paramount to successful results, and financial decisions are no exception. It is well documented that investor behavior, defined as the mental processes and emotions that cause investors to buy or sell, is the decisive factor in long term results, rather than knowledge, skill or luck. We might classify these behavioral missteps as the lack of good judgment in financial decision making.
Disclosure: Claro Advisors LLC ("Claro") is a Registered Investment Advisor with the U.S. Securities and Exchange Commission ("SEC") based in the Commonwealth of Massachusetts. Registration of an Investment Advisor does not imply any specific level of skill or training. Information contained herein is for educational purposes only and is not to be considered investment advice. Claro provides individualized advice only after obtaining all necessary background information from a client. Disclosures and Terms of Use.
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