Wealth Management Blog | WrapManager | Investment Planning (9)

Year-End Investment Planning Checklist for 2013

Posted by Michael J. O'Connor | CWS®, Vice President Investments

November 6, 2013

2013 is shaping up to be a strong overall year for the equity markets, and has hopefully been a positive year for many readers’ investment plans as well.

As the year draws to a close, it’s time to review a few year-end planning strategies and tips. This should serve as a basic guide to investors to review their tax situations and investment plans before year end. Our suggestions may not apply to all investors, so it’s important to consult a financial advisor and/or tax advisor before considering any adjustments.

Tax Planning Strategies to Consider

Offset Capital Gains Using a Tax-Loss Selling Strategy

Investors are able to offset capital gains with capital losses. If capital losses exceed capital gains in 2013, the excess can be used to reduce taxable income, such as wages, up to an annual limit of $3,000 ($1,500 if married but filing separately). If the total net capital loss is more than the yearly limit ($3,000), taxpayers can carry over the unused portion to the next year.¹

Social Security and Restricted Application for Spousal Benefits

November 2, 2013

In our previous post titled “Maximize Social Security with the File and Suspend Strategy,” we showed you a strategy that married couples might use to increase their social security retirement benefits. Not too many retirees are aware that strategies like this exist to increase social security income1, and it goes to show that with the right type of planning, people can get more out of retirement than they might think. There is another strategy known as the Restricted Application for Spousal Benefits that married couples also may use to increase the size of their social security checks. This method allows for one spouse to start collecting spousal benefits, while simultaneously having their retirement benefits grow through the accumulation of delayed retirement credits. Below we’ll explain how this works. [+] Read More

Potential Impact of a Government Shutdown on Your Portfolio Strategy

November 2, 2013

Many investors are wondering how a government shutdown could affect the stock market and their portfolio strategy. History suggests that past government shutdowns have had little effect on the market, though in 2011 the threat of a government shutdown corresponded with a stock market correction. In any case, investors should consult with their financial advisor to ensure their portfolio is properly diversified according to their financial plan. How Has the Stock Market Reacted to Past Government Shutdowns? The last two government shutdowns occurred fairly closely to one another - one lasted from November 13 - November 19, 1995, and the next one spanned from December 5, 1995 - January 6, 1996.1 The S&P 500 exhibited a bit of choppiness in that general time frame, but the general trajectory of the bull market was unaffected: Figure 1: S&P 500 from January 1, 1995 – December 31, 2006 (click chart for larger version) Source: St. Louis Federal Reserve [+] Read More

3 Benefits to Consolidating Your Investment Accounts

October 8, 2013

There are several benefits to consolidating your investment accounts in one place. For some investors, however, this may not be possible for a variety of reasons. One option is to have a financial advisor build a comprehensive plan that includes all of your investment accounts. This can provide many of the benefits of consolidating your investment accounts. Benefit # 1: Help Ensure Your Portfolio is Properly Diversified By combining your investment accounts in one place, you’ll potentially be able to understand what your overall investments look like, and as a result, be better able to make decisions regarding your asset allocation, risk level and more. When you have investment accounts in multiple places - an IRA at Schwab, a Trust at Fidelity, a 529 plan at TD Ameritrade, for instance - you can easily lose track of your overall asset allocation. Many investors often have investment strategies in multiple accounts that overlap, resulting in an improperly diversified portfolio and inappropriate risk levels. [+] Read More

Assessing How a News Story Might Impact Your Portfolio

October 6, 2013

With so much news to consider on a daily basis, it’s important to filter out which news stories might impact the direction of the stock market and your investment portfolio. Some news stories seem like they should adversely affect the markets but they don’t, while others are significant enough to warrant a review of your portfolio allocation and financial plan. If a news story has you considering making changes to your portfolio, call your financial advisor first. He or she can act as a voice of reason to help determine whether making changes is necessary. [+] Read More

"Here We Go Again" - Will the Debt Ceiling Debate Affect Your Portfolio?

September 30, 2013

On August 26, Treasury Secretary Jack Lew sent a letter to Congress warning them that the U.S. will likely reach the debt ceiling by mid-October. He noted that if Congress doesn’t raise it, the financial implications could be adverse for our economy and potentially the global financial system.1 The first thought for many investors is, “here we go again.” As frustrating as these political battles might be, over the past couple of years the debt ceiling debate in Congress hasn’t had much impact on the direction of the stock market, which has been trending higher. Will this time be different? What does the debt ceiling debate mean for your portfolio? A look at history might help us address these questions. The Debt Ceiling Debate Has Been Going On For Over 75 Years The debt ceiling debate is not a recent phenomenon, nor is it unique to any one political party. Since March 1962, Congress has changed the debt limit 77 times, and since the late 1950’s Congress has raised the limit every year, with the exception of fiscal year (FY) 1969 and between FY 1997 – FY 2001. More recent changes to the debt ceiling came through the Budget Control Act of 2011, under which the debt ceiling was raised on three separate occasions. The most recent change came in May of this year, when the debt limit was set at $16.669 trillion, where it stands today.2 [+] Read More

Maximize Social Security with “File and Suspend” Strategy

September 26, 2013

The “file and suspend” strategy can potentially boost your household income immediately, while also allowing for future increases to your social security income. The strategy works well for couples in which one spouse worked (or still works) full-time, and the other spouse didn’t work or only worked for a limited time with limited income. If your benefit is more than double your spouse’s, this strategy could effectively work as part of your comprehensive financial plan.1 How to Apply the File and Suspend Strategy To utilize the file and suspend strategy, you apply for retirement benefits at the full retirement age (age 66 if you were born within 1943-1954)2, allowing your spouse to collect their benefits based on your earnings record. Then, you immediately suspend your own benefits and delay claiming them until they are worth more at an older age. Your benefits will increase by an additional 8% for each year you delay collecting beyond your normal retirement age, up until you turn age 70. [+] Read More

The Dangers of Short-Term Market Timing Strategies

August 31, 2013

As we established in our recent posts “Assessing the Probability of a Stock Market Correction” and “Are There Strategies to Handle Stock Market Corrections?,” market pullbacks are fairly normal occurrences within bull markets. We also pointed out some features that identify stock market corrections - they’re relatively short in duration, vary in size, and perhaps most importantly, they’re unpredictable when it comes to identifying when they’ll start and end. It’s the last point that makes short-term market timing strategies not only difficult to execute, but also potentially harmful to investors. Stock Market Corrections Are Unpredictable With stock market corrections, there are no clear warning signs for when investors should sell out of equities or when it’s time to reinvest. That creates two clear risks to short-term market timing strategies: An investor sells out of equities in an attempt to time the market correction correctly, but the stock market continues to rise. An investor might get it right and sell out of equities before a stock market correction, but then it becomes a question of when to reinvest. There is the risk that he or she misses out on the upside of the recovery. [+] Read More

Social Security Spousal Benefits: The Basics

August 30, 2013

In our previous post on Social Security retirement benefits, we looked at a few factors that might determine when someone should start receiving Social Security benefits. One of those factors centered on a spouse’s age and potential benefit, which we’ll examine a bit more closely in this piece. For the questions and scenarios below, we’ll assume the full retirement age is 66. You can determine what your full retirement age is using the Social Security Administration’s table here. What is a Social Security Spousal Benefit? A spousal benefit is equal to 50% of your spouse’s Social Security retirement benefit, as calculated at their full retirement age. If your social security retirement benefit based on your earnings record is greater than the spousal benefit, you will get paid the higher amount when filing for Social Security. [+] Read More

Are There Strategies to Handle Stock Market Corrections?

August 24, 2013

In our recent piece “Assessing the Probability of a Stock Market Correction,” we explained the nature of corrections and examined the probability of a stock market correction occurring this year. We concluded we would not be surprised if a stock market correction occurred sometime in the future. Is there something that investors could or should do to prepare for the possibility of a stock market correction? Is There a Way to Avoid the Downside of a Market Correction? Given that stock market corrections are normal in a healthy market but unpredictable and short in nature, it’s nearly impossible to time it correctly. However, one strategy to avoid locking-in the downside of a market correction would be to remain invested throughout the correction. Below is a chart of the S&P 500 similar to the one we used in our “Assessing the Probability of a Stock Market Correction” piece, which illustrates the performance of the S&P 5001 from December 31, 2010 – August 14, 2013 (Click on the chart for a larger version): [+] Read More