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General Finance Question – Tax Liability

General Finance Question – Tax Liability

Q: What do you think about UTMA accounts? My kids have them and the use the dividend income for private school costs. We are currently contributing $1200-$1500 per month in various accounts. I have nearly $2,000,000 in investments allocated across various funds. My tax bracket is 31% – 33%. How can I become more tax efficient?

A: We like UTMA accounts as a compliment to a 529-based college savings plan.  At this point, it sounds like your accounts are rather well funded for most schools that your children would attend, so congratulations on that.

As for the allocations, I cannot comment on the mix without knowing more details including risk tolerance, allocation, etc. 

To increase tax efficiency in your portfolio focus on the following types of funds in your taxable account:

  • Stock funds
  • Treasury bonds
  • Tips
  • Munis
  • MLPs
  • Royalty Trusts

Keep these assets in your tax deferred accounts:

  • Total Bond Funds
  • Corporate Bond Funds
  • CEFs
  • REITs


Make every effort to offset gains and losses to minimize your tax liability when you are rebalancing your portfolio. Outside of your investment accounts, if you want to reduce your overall tax bill you can consider the following strategies:

  • Maximize 401(k) contributions
  • Contribute to HSA/MSA
  • Prefund Charitable Gifts (Donor Advised Fund)
  • Education Expenses (Tuition & Fees)


Retirement Planning – Moving Invested Funds

Q: I am a fireman in Georgia. I am 49 years old and plan on retiring sometime in the next few months. I have a 457 retirement plan that I have been putting money in since 1992. In the past, my employer has given us two companies to pick from to put this money into. I have been putting money into the same company all of this time. Now, my employer is changing to a different company and they have plans to move 100% of our balance into a new and different company that will be administering the my employer’s 457 plan. The money will be going into a comparable fund to what I am in now, but not the exact fund. I actually have two questions about this:


1. Since this 457 money is mine and 100% of has been money that I have put into it, can they legally make me change to a different company?


2. If I do have to change to a different company, wouldn’t that really mess up all of the ‘dollar cost averaging’ I have been doing since 1992?



A: Thanks for reaching out with your questions and congrats on being so close to retirement.


First off, retirement plans do change from time to time and the money typically has to be moved. Usually the new plan will offer similar options and it sounds like that is the case here, even though it’s not the exact fund. It is probably worth asking if you are allowed to do an early rollover…otherwise known as an in-service rollover, and move it into an IRA. That way you’ll really open up your investment options.


As far as dollar cost averaging is concerned, moving the money should not have a negative impact on you. The key is to keep the money tax-deferred as well. But in your case, assuming all the money is pre-tax, it will be taxed at your income rate as you pull it out.


March Madness and Your Money

If you’re a sports fan, you’ve probably been following the March Madness tournaments pretty closely and experienced the ups and downs along with the wins and the upsets as each game has been played out. Before each game you were probably rooting for a particular set of teams and feeling uncertain or downright anxious about whether or not they would win as you watched each game.

We can make a comparison between the ups and downs of the March Madness to the volatility we see in the stock market. The good news is, in investing, we have an advantage. Though we may feel uncertain at times, we can set expectations and take a proactive approach with our portfolios along with accepting that there will be volatility in the marketplace no matter what.

In an environment like this, we should remember to keep our expectations high while monitoring market volatility. Remember, volatility is a short term effect of uncertainty in a larger market and investing success is an outcome of our own long-term vision utilizing diversification.

Uncertainty can be eased when we’re paying attention to the market and considering diverse investments in our portfolios. And when we speak “diversification”, we’re not only referring to a mix of stocks, bonds, ETFs, and other income investing vehicles; rather, we’re also speaking to the considerations that should be made to investing in other markets besides the U.S.

So we encourage you to put yourself in a position for growth by thinking long term, staying proactive, and setting expectations with a diverse portfolio. Click here for a detailed explanation of Market Uncertainty.


5 Financial Apps for 2014

Financial Apps, Retirement Planning, Capital Investment AdvisorsOur team recently did an informal survey of our Facebook Fans on Money Matters to determine some of the top financial websites and mobile apps that consumers are using when it comes to financial planning, investing, and advice. Based on the list, here’s ten of the apps that seemed to resonated well.

1. Mint: Mint has continued to increase in popularity by offering a free, user-friendly website and mobile app that allows you to categorize your spending, personal budget, and more. You can sync your personal bank accounts, loans, credit cards, and more to see a daily snapshot of your spending. You can also use it to set financial goals for specific things you want to accomplish.

2. Bankrate: Bankrate is filled with tools for consumers to use and top news on investing. Bankrate has a variety of financial calculators for savings, loans, and more. Many people use Bankrate as a reference to finding the best credit card offers, loan rates, or insurance rates. The site also has a number of tax calculators that come in handy.

3. Yahoo Finance: Yahoo Finance is a quick and easy reference for stock quotes, individual company news, world financial news, and market data. Yahoo offers a mobile app, and both the website and app are customizable to viewing the performance of the stocks you specify.

4. Morningstar: Morningstar provides data on approximately 437,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data.  Morningstar is used by many from inexperienced beginners to sophisticated experts. The premium version of Morningstar offers a more complete analysis of stocks. But here’s a quick tip: Many public libraries subscribe to Morningstar’s premium services if you just want to research something specific.

5. Credit Karma: Credit Karma offers a free credit score and basic monitoring service. Once you create an account, you can log in at any time to review your credit status. You can use the Credit Score Simulator tool to play around with various scenarios that may affect your credit. The site also lists an array of consumer reviews from several categories include credit card offers, auto loans, banks, insurance providers, and more.

Here’s a few more worth mentioning:

Finviz: Finviz, or Financial Visualizations, offers a stock screener that lets you browse through stock data at a glance. You can create lists and specify criteria to have a customized experience.

Wikinvest: Use this to sync all of your investments from various brokerage accounts in one place. It also calculates brokerage fees so you can monitor how much you are paying out.

Sigfig: App available for iPhones, Android phones, and Window phones. This website and mobile app allows you to sync all of your investment accounts, receive a personal and independent analysis, and stay on track with their tools.

*This listing does not endorse any of the websites or apps listed above. We always recommend you consult with an advisor when making decisions for financial planning.


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