ISAKOV Planning Group Blog
Thursday, January 02 2020
Review Your 2019 Income and Tax Obligations Now!
You work hard to put away as much money as possible for your retirement, a child’s education, or other long-term goals. But taxes can eat away at those savings, right away, in the future, or even both! Tax planning is essential to keep more of what you earned and saved. And that means looking at your 2019 income before the end of the year and calculating what your tax obligation will be now. This way, you can plan to be more efficient in 2020 and beyond, creating a strategy that you can benefit from for many years.
A Common Tax Planning Mistake: Don’t Rely on Your Accountant
Many professionals, business owners, and real-estate investors learned this lesson long ago: If they wanted to optimally retain the money they earned, they needed to heed the expert advice of financial planners.
A mistake in planning for taxes could prevent businessmen and investors from being able to reinvest, adding to their accumulated wealth, and saving for the future. One common error is to rely on their accounting professionals for tax advice. This may suffice for businesspersons with great understanding of the tax code and knowledge of how it applies to their field of business or investing. However, unless the accounting group has a good deal of experience in their specific field, they could be led astray. A critical mistake in tax planning could mean you pay the US government much more than you should, setting back your financial plan a number of years.
The average investor may not understand the benefits of reinvesting or converting from a standard IRA to a Roth IRA. Any accountant can advise you to reduce your tax liability by contributing to an IRA, but that person may not be a registered investment adviser—and able to counsel you regarding the type of IRA investment that makes the most sense.
A Financial Adviser Is Your Tax Planning Resource
A financial adviser is better trained and equipped to assist with your tax planning. The reason is that financial and investment advice must consider tax implications of virtually any monetary decision. In other words, we’re talking about going beyond recommending expense deductions: Financial planners provide comprehensive tax planning strategies! This invaluable advice will help keep your taxes low into the future and address any changes in the tax law that can alter your savings strategy. Your tax advice and financial advice should go hand in hand.
Learn how a retirement savings account can be an asset to reduce taxes by $5,000, $18,000, or even $52,000. But to gain these tax advantages, contact Isakov Planning Group before December 31st. There is still time to review your financial and tax planning status and provide options to keep more of your earnings today and into the future.
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Monday, December 02 2019
Playing the investment game can play with your emotions and sometimes with your mental health! Although the US stock indexes reached new highs in 2019, those who fret over their investments can make a few New Year’s resolutions to help keep their mental and physical health!
1. Stop checking your investment portfolio several times a day. Unless you are a day trader, and few of us are, failing to check on your investments over the passing hours or days will not materially affect your portfolio. It will also prevent you from making unnecessarily high-pressure decisions about whether to buy or sell, based on what may not be meaningful press releases, guidances, or unexplained stock movements. This is guaranteed to lower your blood pressure!
2. Contribute to a retirement savings plan. There are few investments that will be of greater value for retirement and the future of your family. There are several ways to do this:
3. Start saving money automatically. Remembering to deposit money every week or month to a brokerage account can easily be derailed. Any broker or bank will help you set up an automatic savings plan to automatically transfer a dollar amount that you set, as well as a frequency you set, from your bank account.
4. Reinvest your stock dividends. More often than not, stocks that pay dividends are automatically reinvested by the broker. This is a good move. If you decide to receive a dividend check that is subsequently spent, you’re missing a prime opportunity to grow the size and value of your holdings. If the dividend is reinvested, even if the stock price remains the same the next quarter, you will own more of the stock and the next dividend issued will be larger.
5. Set up an emergency savings account. Although very low-interest savings accounts are less attractive than in years past, they are useful to put money away for that “rainy day,” when the furnace needs to be replaced, your trusty old car finally belches its last oil-stained smoke, or you find yourself out of work for an extended period. You may need quick access to that money to pay for ordinary expenses. You should think about having sufficient liquid assets to cover several months of these costs.
These 5 suggestions can change your future savings outlook, as well as spare your health and pursuit of happiness! Contact Isakov Planning Group now to discuss any of these New Year’s resolutions.
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Friday, November 01 2019
Budgeting is a funny thing. Some people know exactly how much they spend, balancing their checking accounts every day. Others really don’t pay much attention to it, and thus find it difficult to make a budget and stick to it. For some, even the simplest budget rule—spend less than you make—seems too challenging. But it is possible for even the unmotivated to make a simple budget that governs everyday spending (not including housing and insurance expenditures). This outline shows simple steps to begin the budgeting process.
Even the unmotivated consumer can learn a lot from this simple budgeting map. The most important thing to remember is to include the major, most critical expenditures, if you forget some of the details, they can be worked into the system once you get used to it.
Contact us at Isakov Planning Group if you want to learn more about simple ways to understand the budgeting process and importantly better ways to squeeze savings from your budgets.
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Monday, September 30 2019
401 (k) Savings Are Not Liquid Savings
In the last couple of years, and especially the last 6 months, the bull market has become increasingly conservative. That has many folks checking their monthly balance statements in their 401(k) accounts, and even in some cases, convinced investors that they have crossed the millionaire threshold.
Not so fast. Their 401(k) account is a retirement savings account. This means that unless you are retired or on the verge of retiring, these savings will only serve you several years down the road. For example, Robert the Businessman can’t easily use his blooming 401(k) cash to take a vacation or remodel a bathroom, or even buy groceries.
I’m guessing that most of these “401(k) millionaires” do not have a millionaire lifestyle. First of all, retirement savings are not liquid savings. Robert cannot use this portfolio practically for everyday needs. The vast majority of people are living off their salary or other regular S-corp earnings. The smart ones are putting reasonable tax-deferred dollars into their 401(k) or other retirement accounts and putting some money aside that can be spent on routine costly items, like vacations or home repairs.
Second, the stock market is due for a correction, based on experts’ predictions and the duration of the current bull market. What happens to the $1 million value of Robert’s 401(k) account if the S&P sinks 20%, even with a balanced portfolio? It may take several years to reclaim those lost assets, and in the meantime, Robert is still working as hard as ever, and shoveling as much of his savings into the 401(k) as he can.
It’s great (and necessary) to have plenty of money packed away for retirement. However, piling as much money as possible exclusively into a 401(k) is not a reasonable approach, unless you are like so many millions of Americans who are well behind on their retirement savings.
That’s why at Isakov Planning Group, we advocate a balanced plan for our clients’ investment accounts. This gives them the liquidity they need to live comfortably today, while planning for their comfort tomorrow.
Being euphoric over today’s retirement portfolio performance is nice for the moment, but it is important to have a balanced savings approach between liquid and nonliquid investment accounts.
Contact Isakov Planning Group for more information.
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Tuesday, September 03 2019
Dedicated employees of a small, growing business need the security of knowing they are helping to finance their retirement. This is a key reason why some employees join one company over another. Starting a retirement plan not only helps finance your future, but it is probably the only way your employees can fund their own. Additionally, retirement fund contributions are tax-deductible as a business expense. This can mean considerable tax bill savings at the end of the year.
Small business owners have several valuable options in setting up retirement programs. Much of the choices boil down to, (1) who will be eligible for the retirement program, (2) will eligible employees be able to contribute their own money to the plan? and (3) which is most important to you, the business owner—maximizing contributions or simplifying administration of the retirement plan?
Four types of retirement plans are at the center of small business discussions:
Each of these plan types offer the potential for tax-deferred savings growth and the possibility of deducting your company contributions as a business expense. In addition, your business will be entitled to a tax credit for start-up expenses associated with setting up your first retirement plan.
In order to decide which is best for your small business, you’ll need to lay out all of the costs of administration, contribution limits, and the tax benefits of each type. Don’t make the mistake of choosing a plan that fails to deliver the best combination of costs and benefits. The US Department of Labor has published a detailed paper that compares each type of plan and is available free of charge.
Here is a basic description for each option:
Speak with our financial planning professionals at Isakov Planning Group about why a small-business retirement program is important and how the options stack up for your specific business.
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Wednesday, August 21 2019
All of these questions involve various measures of risk, which can affect investment markets, inflation, and currencies. Uncertainty, as illustrated above, unnerves investors and the markets. Individual investors cannot control uncertainty, but the way in which we react to it pretty much defines whether our long view of investing will be a success.
Uncertainty is not the same as risk. Uncertainty fuels risk. Uncertainty cannot be measured, but we try to measure risk. For reasons (that will not be explained in this post), stock markets despise surprises. They usually react badly to them, with large drops in value. Individual and corporate investors may sense further trouble ahead and try to move significant holdings into areas they believe are relatively protected from market volatility. On the other hand, others exploit that uncertainty and buy shares, expecting that the crisis will pass and rebounds are inevitable. Either reaction is not compatible with sound long-term investment planning.
One of the most difficult challenges in investing in uncertain times is to identify situations when emotion is dictating portfolio decisions and discipline yourself against these forces. That means determining whether you need to reevaluate your portfolio more than once annually. If investing for retirement, for example, try to tune out the daily market noise and think more broadly‑do you have the right investment balance of stocks vs. bonds vs. other options? If you limit the frequency with which you consider making significant changes, you will be able to resist the emotional urges that come with sudden environmental changes. The fact is, if your portfolio is properly diversified, one aspect of it will always underperform the market over the short term. But the other side of the coin is the one component should always perform substantially better than the market indexes.
Regardless of volatility in the market, continually putting money away is critical for successful long-term investing. In other words, don’t suddenly stop making monthly contributions to your investment account, simply because you are worried whether a massive tax cut will be passed. Investing for the future requires a discipline that must be learned (and earned!) and a detachment to today’s wild events and uncertainty.
Contact an Isakov Planning Group Financial Advisor today to discuss your long-term investment goals.
Friday, July 19 2019
How do you choose a financial advisor that will best meet your retirement needs? Here are a few points to consider:
Make Sure Your Advisor Is Working for You! Don’t fool around with this… Your financial advisor must be someone you can trust fully: They must be legally bound to give you advice that is in your best interest, and no one else’s (especially their own). This is not the case with most financial advisors; they may be more focused on earning commissions than on growing and managing your retirement assets to the best of their ability. Ask this person if he or she is a “true fiduciary.” If the advisor is, they should have no problem disclosing the money he or she will make (upfront and long term) with any recommended investment. Related to this question is:
Understand How They Earn Money When Advising You. Good financial advice is valuable. There is nothing wrong with paying a fee to a fiduciary you trust and is providing the results you’d expect from an expert. On that same note, your financial advisor should have no problem disclosing how the fees you pay are spent.
How Many Years of Experience Does Your Financial Advisor Have? Let’s assume you are working with an expert. To attain this level of professionalism, your advisor had to build many years of training and education, and have extensive experience guiding other customers through their retirement. This sounds like a no-brainer, but you’d be surprised how often this question goes unasked!
Check Whether Your Advisor Has Been Sanctioned. No one wants a financial advisor who has regulatory or licensing issues or complaints against him or her. There are easy ways to check to see if this is the case. A free tool that is available on the Web is called , which is maintained by the Financial Industry Regulatory Authority. Also, do they have the certificates (such as a Certifed Financial Planner) that they say they do? If you’d like to take a closer look, the organizations who issue certifications or licenses maintain their own websites that consumers may use to check creditials.
Your Financial Advisor Should not Hold Your Money or Investments. Firms that invest your money and hold onto it are not necessarily a situation that must be avoided at all costs, but if they do hold your money, know that there is a greater risk for fraud or embezzlement. A custodial firm is a far better situation. You’ll sleep better knowing that a firm like Fidelity or Schwab is holding your money, and a separate financial advisor is managing it.
Ask Your Advisor to Create a Retirement Income Strategy. Most often, when you invest before retirement, you are seeking to maximize the growth of your money while considering the amount of risk you believe is acceptable. Once you retire, that may not be the case. The goal may be to ensure stable income through your retirement years. If your financial planning professional says that he or she can devise such a plan for you, make sure that you understand the approach fully (and therefore can avoid unnecessarily risky investment options). Just as importantly, don’t believe an advisor who tells you that there is no risk or that he or she has eliminated all risks. Financial risks can only be minimized, almost never eliminated (think of putting your money under your mattress!). Your advisor will serve you best by explaining the risks fully and discussing with you whether they are worth taking.
You’ve worked too long and saved too much to be uncomfortable with how your money will be invested once you retire. This money needs to work with your other income sources (such as Social Security and pension plans) to create a secure living for a lifetime. These simple tips can help you find the right direction for you and your loved one to achieve your financial retirement goals.
Tuesday, June 04 2019
Federal Reserve Chairman Jerome Powell signaled an openness to cut interest rates if necessary, pledging to keep a close watch on fallout from a deepening set of disputes between the U.S. and its largest trading partners.
Referring to “trade negotiations and other matters,” Powell said Tuesday in Chicago that “we do not know how or when these issues will be resolved.”
“We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2% objective,” Powell said in opening remarks at a conference at the Chicago Fed.