CARES Act - What you need to know about your IRA

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In order to combat the many economic implications of the coronavirus pandemic, a monumental emergency funding bill has been passed. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) aims to provide relief to American citizens and businesses through a variety of financial measures. One particular focus of the bill is on how Americans can use their retirement accounts during a potential time of need. This post will focus on 3 measures related to IRA accounts; Required Minimum Distributions, early distributions, and special tax treatment of distributions. The first of the provisions apply to all Americans while the second and third apply only to those directly affected by the virus (defined below.)

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Lessons from a Correction

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For many investors, Monday felt like a slap in the face. Following news over the weekend of a oil price war between Saudi Arabia and Russia, the S&P500 traded down over 7% at the open. A move so swift, it actually triggered the 1st circuit breaker measure - a system put in place in 2013 to prevent these types of flash crashes. Its a strange day when almost everyone can be heard discussing the markets. In the gym, in the line at the grocery store, in the lobby of my building, yesterday was one of those days.

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Beware of Behavioral Biases

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The coronavirus (COVID 19) breakout has been a fascinating real life case study of behavioral finance and the effect it can have on investors, particularly those operating outside of a trusted advisor relationship. Behavioral finance is the field of study that looks at investor psychology as it relates to money. It reveals the many pitfalls and fallacies the brain is vulnerable to when dealing with decisions specifically relating to money or investments. It is no secret that people, in general, are not great at investing. Emotions can be powerful and counter productive. Separating one’s feelings from the facts is a high hurdle for many Americans, leading many to doing the exact wrong things at the worst times.

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March Private Client Letter - Navigating a Crisis

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We at Clearwater Capital Partners have often written about the importance of “facts over feelings” when it comes to navigating periods of market volatility and uncertainty. The current breakout of the novel coronavirus has produced a significant spike in feelings (specifically “fear”). Now is the time to keep emotions in check as we attempt to ascertain the “facts” connected to this difficult situation. We believe one’s reaction to higher volatility will be far more determinative to long-term progress than the volatility itself.

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Important Tax Changes for Illinois Car Buyers

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If you are someone who has been thinking about buying a new car in the near future, then you may want to consider doing so before the new year.

On June 28th Gov J.B Pritzker signed Bill 690 which quietly passed new tax laws that will affect Illinois car buyers. Beginning January 1st, 2020 the value of any trade in vehicle will be capped at $10k in calculating the tax on the transaction.

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Are you considering relocating when you retire? Tax issues to consider.

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For those thinking about relocating to a new city or state during their retirement years, there are several important factors to consider prior to making this decision.

For many, being in a warmer climate during the winter months while still maintaining proximity to family and friends is a major priority. For others, living where there is accessibility to quality health care facilities, while being able to enjoy cultural and entertainment options such as museums and concerts in a big city, or outdoor activities such as golf and walks on a beach, is important.

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Capital Gain Distributions - Portfolio Insights

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As we approach year-end, investors need to be aware of upcoming capital gain distributions. In addition to realizing capital gains through selling securities that have appreciated, investors can be blindsided when their funds distribute capital gains to their investment account. These gain distributions will add to the investors tax liability unless the funds are held in a tax deferred account such as an IRA.

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Family Office — Social Capital

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Family Office — Social Capital

As outlined in our 2017 ‘Intro to Family Offices’, we highlighted the intentionality of structure which families bring to develop their Capital. In particular we shared that a family’s wealth, and thereby risk management, should be viewed across a wide array of Capital considerations and approached with respective thoughtfulness.

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The Potential Pitfalls of Big Data

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The Potential Pitfalls of Big Data

What do avocados, Superbowl Champions, and Sports Illustrated Swimsuit models have in common? They all have been used to predict market performance. With the increasing availability of computing power, financial experts are increasingly using big data to draw observations / trends. While this has produced some pretty important concepts, it has also introduced many eye rolling observations. In this post, James Chapman brings readers through some of the more odd indicators, and some of the potential pitfalls of big data.

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Planning for the Cost of Long Term Care

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When considering the likelihood of a financially successful retirement one factor that should be considered is the risk of needing long term care and the potential cost of that care. If care and support is needed during working years, wealth accumulation and retirement planning will likely be negatively impacted. While this is possible, the emphasis of this article will be on the need for long term care arising later in life and the financial cost of that care. As longevity improves, the probability of physical or cognitive decline requiring the need for daily assistance increases. The cost of that care today and into the future must be considered on the negative impact long term financial security.

Refinancing your Home Mortgage

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Proper wealth management looks at both sides of the balance sheet, both the assets and the liabilities. For most people, their home mortgage is one of their largest liabilities to manage. Given the amount of clients who have asked about this recently, I put together a quick video on what a refi is, some things to watch out for, and when it makes sense.

Family Office — Family Business Boards

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Family Office — Family Business Boards

As outlined in our 2017 ‘Intro to Family Offices’, we highlighted the intentionality of structure which families bring to develop their Capital. In particular we shared that a family’s wealth, and thereby risk management, should be viewed across a wide array of Capital considerations and approached with respective intentionality.

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4 Money Moves to Make in your 20’s

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For many of my peers the last 2-4 years has been a period of much transition. You have graduated college, began establishing yourself in the workforce, and likely have moved out into your own place. Congratulations, things are coming along quite nicely. This transition is one that a lot of people refer to as “adulting.” Now, this is a term that I find sort of cringe worthy, however it unfortunately does a nice job at describing the transition that I am writing about. This period of transition also leads to a lot of money related questions “what am I not doing that I should be doing?” Being a younger financial professional, I do get a lot of questions about what people should be doing at this point in their lives. In an attempt to begin this conversation, I have compiled 4 things to do to serve as a starting point.

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Addressing Cash Flow Needs During Retirement – Which Accounts Should I Withdraw From and in What Order?

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In a recent white paper titled “Asset Location”, I touched on some of the important things to consider regarding the placement of certain types of assets within different accounts in order to optimize the long-term tax efficiency of one’s retirement pool of assets.

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“Don’t let the Tax Tail wag the Investment Dog”

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“Don’t let the Tax Tail wag the Investment Dog”

Ok wait what..? I know I know allow me to explain what I mean by this ridiculous sounding sentence.

“Don’t let the tax tail wag the investment dog” is a phrase I heard repeated across our trading floor from one of our Senior Partners during my first years in portfolio management. I was understandably confused by this insane sentence, but I did not want to be “that guy” and ask. What I went on to learn was that he meant that we could not allow tax consequences to dictate our portfolio management strategy. Managing a portfolio in a tax efficient matter was critical, however there would be moments when a portfolio would need to be rebalanced and that sale would trigger capital gains taxes. In essence he acknowledged that paying taxes was of course never fun, but that we could not allow that to intrude into our portfolio management.

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Asset Location—What is it and why is it important?

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As we frequently discuss with our clients, asset allocation is by far the most important determinant of long-term investment portfolio performance. Asset allocation is the process of investing one’s investment dollars across various asset classes, regardless of the type of account where those assets are held.

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Three Questions to Ask Your Financial Advisor

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Three Questions to Ask Your Financial Advisor

I recently found myself in a conversation with the parents of a good friend of mine. This is a family I have known well for many years. They are, of course, aware of my profession, but we have always kept things casual when it came to “business talk.”

In this case we stumbled into a conversation about the markets, which naturally lead to discussions about their financial advisor. They were mentioning that they had been seeing headlines about the market recently and that they should “give him a call to see what he thinks about it.” They then went on to say that they think he does a good job for them but that they weren’t really that sure. I then received an unprompted “Well James, you are a financial advisor, what are the questions we should be asking him?!”

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