Financial Tips for 2020

The U.S. has enjoyed 10 years of a booming stock market and a growing economy. It’s too early to tell how 2020 will look, but there are some signs that it doesn’t look quite as promising. Between warnings of a possible economic pullback and a contentious presidential election year, investors may want to consider financial moves designed to help protect gains and optimize future opportunities.

For example, while domestic securities were global leaders in 2019, Morgan Stanley believes U.S. stocks and bonds will underperform other developed countries in 2020. The wealth manager predicts the S&P 500 Index will have a small decline to 3,000 points by the end of the year as the dollar weakens, corporate earnings edge downward and “unique” political risks are expected in the run-up to Election Day.1

We recommend that individuals take a long view when it comes to investing, particularly in relation to retirement planning. However, as we approach this new decade, it may be important to review your portfolio’s overall asset allocation, not just within the context of 2020, but for your long-term financial objectives. Please give us a call if we can help you make this assessment.

As for retirement planning, be aware of three changes scheduled to impact Social Security benefits in 2020: 2

1. The earnings limit subject to FICA payroll taxes is scheduled to increase by $4,800, to $137,700. This means employees who earn at or above that threshold will pay an additional $367 in payroll taxes during 2020.
2. Retirees received a 1.6 percent boost in Social Security benefits, which translates to roughly $288 (on average) more for the year.
3. Social Security recipients who haven’t reached full retirement age can earn $600 more in 2020 without a benefits reduction — up to $18,240. Beyond that limit, every $2 in earnings will result in $1 withheld in benefits.

It’s a good idea to consider your income tax status early in the year. A lot of people did not expect the Tax Cuts and Jobs Act to negatively impact their taxes and received an unpleasant surprise when they filed returns last year. You can help prevent having to owe additional taxes on filing day by adjusting your Form W-4 exemptions with your employer so that more income is withheld throughout the year.3

Also, consider making your 2020 contributions to tax-advantaged accounts as early in the year as you can. That’s because any contributions you make to accounts such as IRAs, 529s and workplace retirement plans will have more time to take advantage of tax-deferred compounding growth.4

1 Joanna Ossinger. Bloomberg. Nov. 17, 2019. “Morgan Stanley Sees U.S. as a Laggard in 2020 Across Markets.” https://www.bloomberg.com/news/articles/2019-11-18/morgan-stanley-sees-u-s-underperforming-in-2020-across-markets. Accessed Dec. 18, 2019.

2 Kenneth Terrell. Oct. 28, 2019. “What to Know About Social Security Changes for 2020.” https://www.aarp.org/retirement/social-security/info-2019/social-security-changes-look-ahead.html. Accessed Jan. 15, 2020.

3 Kiplinger. Oct. 29, 2019. “27 Money Moves to Make Now to Prepare for 2020.” https://www.kiplinger.com/slideshow/saving/T023-S002-money-moves-to-make-now-to-prepare-for-2020/index.html. Accessed Dec. 18, 2019.

4 Business Wire. Dec. 16, 2019. “20 Financial Resolutions for 2020 from the AICPA.” https://www.businesswire.com/news/home/20191216005073/en/20-Financial-Resolutions-2020-AICPA. Accessed Dec. 18, 2019.

Our firm is not affiliated with or endorsed by the U.S. government or any governmental agency and does not provide tax advice. Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Tax Tips & Updates for the 2019 Filing Season

As we enter a new year, it’s time to start thinking about smart tax moves to help minimize what you’ll owe Uncle Sam on April 15, 2020. Given the fact that the 2017 Tax Cuts and Jobs Act went into effect only last year, taxpayers are still learning the ins, outs and potential undiscovered advantages of the plan. For example, if you did not itemize deductions on your previous federal return, your state tax refund will be tax-free.1

Bear in mind that other clarifications have come to light since the law was passed, such as deducting interest on a home equity line of credit. However, if you actually used the money from a home equity loan to repair or renovate your home, the interest on that loan is still deductible.2

We recognize that tax planning is an onerous task, made more difficult by changes in tax law. If you are wondering how any changes in your investment portfolio may affect your taxes, please give us a call. If we don’t have the exact tax expertise you need, we can help point you in the direction of someone who does.

In addition to doubling the standard deduction, the Tax Cuts and Jobs Act reduced individual income tax rates to between 12% and 37%. However, these cuts are scheduled to expire in 2026. In recent months, the Trump administration has proposed dropping the marginal rate even lower for the current 22% income tax bracket, down to 15%. While this appears to be a strong carrot entering the 2020 campaign year, there’s been no clarification as to how this tax cut would be paid for and, given that it would add roughly another trillion dollars or so to the federal debt throughout the next decade, is not likely to gain traction in Congress.3

If you traditionally deducted substantial mortgage interest as well as state and local real estate and income taxes, you may have seen a noticeable difference in last year’s return. The Tax Cuts and Jobs Act capped these federal deductions at $10,000, which some real estate analysts say is responsible for lower home valuations in some parts of the country.4

It’s also important to stay abreast of the tax-related ins and outs of inherited IRAs. If you are the deceased account owner’s spousal beneficiary, you have several options — one being that you can basically treat the account as your own. However, if you’re a non-spouse beneficiary, your options are limited. Currently, you can either take distributions based on your own life expectancy — the “stretch option” — which allows the funds to continue growing tax-deferred in the account; or, you must liquidate the account within five years of the original owner’s death. Note that as of 2019, Congress is currently considering legislation that would eliminate the stretch option and require full liquidation within 10 years of the account owner’s death.5

For more information on how we may be able to assist you when it comes to incorporating your tax planning into your Retirement Plan, give our office a call at (734) 769-1719 or email us at office@imberwealth.com.

1 Rocky Mengle and Kevin McCormally. Kiplinger. Dec. 2, 2019. “20 Most-Overlooked Tax Breaks and Deductions.” https://www.kiplinger.com/slideshow/taxes/T054-S001-most-overlooked-tax-deductions-breaks-2019/index.html. Accessed Dec. 5, 2019.

2 Andrew H. Friedman. Merrill Lynch. March 19, 2019. “Tax Law Update: New Information on What’s Deductible – and What’s Not.” https://www.ml.com/bulletin/tax-update-the-irs-answers-frequently-asked-questions.recent.html. Accessed Dec. 5, 2019.

3 Knowledge@Wharton. Nov. 19, 2019. “A Middle-class Tax Cut: Weighing the Costs and Benefits.” https://knowledge.wharton.upenn.edu/article/blouin-middle-class-tax-cut/. Accessed Dec. 5, 2019.

4 Knowledge@Wharton. Oct. 22, 2019. “Why Tax Changes Are Hurting the Housing Market.” https://knowledge.wharton.upenn.edu/article/tax-changes-hurting-housing-market/. Accessed Dec. 5, 2019.

5 James Royal. Bankrate. Nov. 19, 2019. “7 inherited IRA rules all beneficiaries must know.” https://www.bankrate.com/retirement/inherited-ira-rules/. Accessed Dec. 5, 2019.

Investment Advisory Services are offered by Imber Financial Group, LLC., a Registered Investment Adviser firm. Insurance services are offered through Imber Wealth Advisors, Inc. Imber Financial Group, LLC. and Imber Wealth Advisors, Inc. are affiliated companies

Market Trends to Watch

Market Trends to Watch

The investment world is like the weather: constantly changing. Financial vehicles are tweaked and improved upon, particularly when there are changes to tax law or compliance rules. The world of finance is fluid, and so are we. As our lives evolve, it’s important to review and sometimes make adjustments to our investment and insurance goals and strategies.

The difficult part can be keeping up with all the changes. We believe one of the best ways to do that is to work with a financial advisor and meet with him or her regularly. At least once a year, it’s good to review your current situation, find out what changes or new products are available, and determine if you should make any alterations to your financial portfolio. Contact us if you are interested in such a consultation.

Following is a roundup of news and timely reminders from the investment industry.

 Impact Investing

What may have started as an environmentalist movement to effect change by tapping invested assets, the sustainable investment industry has grown into a mainstream strategy. The share of assets invested in funds focused on environmental, social and governance (ESG) issues increased 40% from 2000 to 2017.1

 This is no longer simply a “do-gooder” motivation. Studies have revealed that companies focused on environmental efficiency — meaning they minimize the use of natural resources and generate less production waste — tend to enjoy economic advantages over less environmentally sensitive competitors. These advantages can include lower costs; higher flexibility and efficiency in their supply chains; increased productivity; reduced regulatory risk; and fewer costly fines, recalls or mitigation requirements. As a result, recent studies found, the stocks of these companies tended to be less volatile — particularly in manufacturing and other resource-intensive industries.2

 E-Commerce Update

Online sales are starting to have a more profound effect in some sectors of the investment market. For example, in 2018, Amazon surpassed Walmart as the top apparel retailer in the United States, claiming more than 9% of the market. But not all traditional retailers have been hit as hard by e-commerce; for example, some investment analysts say retailers like QVC and those in the business‑to‑business e-commerce market — notably in the home improvement and auto parts industries — remain competitive because they are more insulated from Amazon or other online competitors. 3

 And there’s another angle to consider with e-commerce. While we normally associate online retailers with low overhead, overall the industry requires three times the warehouse space of primarily brick‑and‑mortar retailers. In turn, this has created opportunities in the Real Estate Investment Trust (REIT) market that focuses on commercial properties.4

Investment trends

According to Bank of America, some of the economic and societal changes to watch over the next 10 years include:5

1. More disruptions in the global flow of goods, ultimately leading to a rebalancing that will increase productivity and lead to a more sustainable global economy

2. A focus on high-quality companies in sectors with low political risk, such as utilities, national defense, waste management, data processing and payments, and global beverages

3. Markets responding to demographic shifts, such as the rise of the middle class in emerging market countries and millennials’ preference for tech compatibility and sustainability

4.Continued growth of energy-efficient, renewable, sustainable and green initiatives