Monday, April 26, 2021

What the Stimulus Check Could Mean for Investors

 


Millions of Americans have embraced the new relief money resulting from the $1.9 trillion America Rescue Plan. They’ve been able to pay for utilities and put food on the table while looking for employment. Those who maintained their jobs throughout the pandemic have embraced the payout as well, but for different reasons. For them, it’s not about survival, it’s about ways to spend that lovely windfall.

 

It’s important to recognize that the new stimulus bill, passed at the same time that vaccine distribution became widespread, is not just about helping households in financial distress. It’s also about jumpstarting the economy right about the time people can get back out and find work. That’s why it’s called a stimulus bill — to stimulate spending. Households that need the money can spend it on consumer staples or pay down debt.1

 

If you’re looking to invest your stimulus money in an insurance or financial product, we can help. Contact us for a comprehensive portfolio review and advice on the best way to position your assets for your financial goals.

 

Regardless of what goods and services are purchased, the US economy will benefit from households spending. The more consumer spending, the faster the economy can recover and grow. The more it grows, the more demand for consumer goods will increase jobs, and jobs create more spenders and taxpayers. Increased sales and income taxes put more money in government coffers, which can then be used to pay down the debt acquired by the three stimulus bills passed during the pandemic.

 

Sectors and companies standing to benefit from the stimulus may be of particular interest to investors as we weave our way out of this health and economic crisis. Analysts at UBS Global Wealth Management expect capital to rotate out of tech and growth stocks and into cyclical sectors that will benefit from higher growth and a steeper yield curve, including financials, industrials, and energy stocks. Consumer discretionary stocks poised for growth include companies in travel, leisure and hospitality sectors, as well as Amazon. Unemployed workers will likely use enhanced jobless benefits to pay for rent, which benefits residential REITS.3

 

Even in the wake of a pandemic, there are always winners. For example, vaccine maker Moderna has been one of the highest performing stocks throughout the last year and a half. And now, the stimulus bill provides an additional $160 billion for vaccine development and distribution, which is a boon for pharmaceuticals.

 

Moving forward, investment analysts see underpriced “value stocks” gaining more momentum than growth stocks. While tech company stocks have soared during the pandemic, a virus-free country bodes well for airlines, hotel chains, movie theatres and other industries shut out by social distancing restrictions.4

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 


1 Martha C. White. NBC News. Feb. 8, 2021. “Stimulus checks that don’t get used right away are still ‘economic rocket fuel,’ experts say.” https://www.nbcnews.com/business/economy/stimulus-checks-still-boost-economy-even-if-money-goes-savings-n1257073. Accessed March 15, 2021.

2 Palash Ghosh. Forbes. March 15, 2021. “Amazon, Six Flags, Square: Here Are The Stocks Ready To Rise Thanks To New Stimulus Checks.” https://www.forbes.com/sites/palashghosh/2021/03/15/amazon-six-flags-square-here-are-the-stocks-ready-to-rise-thanks-to-new-stimulus-checks/?sh=2ebd86071a29. Accessed March 15, 2021.

3 John Hyatt. Nasdaq. March 12, 2021. “What Biden’s $1.9T Stimulus Means for Investors.” https://www.nasdaq.com/articles/what-bidens-%241.9t-stimulus-means-for-investors-2021-03-12. Accessed March 15, 2021.

 

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.

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

 


Tuesday, April 20, 2021

Tax Topic: Qualified Business Income Deduction

 


One of the provisions included in the Tax Cuts and Jobs Act of 2017 was the Qualified Business Income (QBI) deduction. It is designed as a tax break for small businesses or self-employed individuals and is comparable to the enhanced tax breaks legislated for larger companies. However, while the corporate tax changes are made permanent, the QBI is scheduled to end in 2025 – along with a host of other individual tax-return breaks.

 

The QBI applies to revenues that are “passed through the business,” so the owner actually pays taxes on that money on his or her individual tax return at their individual tax rate. Since they do not benefit from the substantially reduced corporate tax rate, S Corp or sole proprietors can claim up to 20% of their “qualified business income” as a deduction.1

 

The IRS defines QBI as income, gains, deductions and losses from a qualified trade or business – including income from partnerships, S corporations and sole proprietorships – minus business deductions such as half the self-employment tax, self-employed health insurance and qualified retirement plan contributions.2

 

To qualify, the taxpayer’s income must be at or below $163,300 for single filers or $326,600 for married filers ($164,900 / $329,800 in 2021). If income is above those thresholds, the taxpayer may still qualify for the QBI, but it gets tricky, particularly if he or she works in a specified service trade or business. This generally includes high-income professions such as a doctor or a lawyer.3 It’s a good idea to consult with a financial professional to help you understand if you qualify for this deduction.

 

A taxpayer with several different entrepreneurial ventures can combine those multiple sources of income to calculate his total QBI. The higher the qualified income, the higher the deduction (as long as it remains below the threshold for the individual’s filing status). When income looks to be higher than the limit, these tactics can be used to help reduce it to qualify for the QBI deduction:4

 

Be aware that a taxpayer who claims business losses may still qualify for the QBI but, here too, it gets very complicated.5 It’s important to work with a qualified tax professional who is familiar with the ins and outs of this deduction.

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

1 Stephen Fishman. Nolo. 2021. “The 20% Pass-Through Tax Deduction for Business Owners.” https://www.nolo.com/legal-encyclopedia/the-new-pass-through-tax-deduction.html. Accessed March 9, 2021.

2 IRS. April 8, 2019. “Facts About the Qualified Business Income Deduction.” https://www.irs.gov/newsroom/facts-about-the-qualified-business-income-deduction. Accessed March 9, 2021.

3 Andrea Coombes and Tina Orem. Nerdwallet. Nov. 13, 2020. “Qualified Business Income Deduction (QBI): What It Is & Who Qualifies.” https://www.nerdwallet.com/blog/taxes/pass-through-income-tax-deduction/. Accessed March 9, 2021.

4 Paul Chaney. Small Business Trends. March 3, 2021. “What’s the Qualified Business Income Deduction and Can You Claim It?” https://smallbiztrends.com/2020/08/qualified-business-income-deduction.html. Accessed March 9, 2021.

5 Michael T. Odom. The Tax Adviser. Dec. 1, 2020. “QBI deduction: Interaction with various Code provisions.” https://www.thetaxadviser.com/issues/2020/dec/qbi-deduction-interaction-code-provisions.html. Accessed March 9, 2021.

 

Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.

 

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.

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

 

Friday, April 16, 2021

Warren Buffet's Annual Shareholder Letter

 


Every year, Berkshire Hathaway’s Chairman and CEO Warren Buffett sends a thoughtfully crafted letter to the company’s shareholders from which the investment industry gleans whatever newfound wisdom possible. Given that 2020 was an unusual year by economic, social and financial standards, there is much to glean.

 

Despite the difficulties the U.S. has experienced in managing the COVID-19 virus, Buffett has one sustaining message: “Never bet against America.” He also is a man who aligns his money with his beliefs. Presently, Berkshire Hathaway owns the highest value of U.S. business assets – comprised of property, plants and equipment – than any other company in the country.1

 

Berkshire is a conglomerate of disparate companies, and Buffet spends much time in his letter imparting what he’s learned about being a majority shareholder versus running a business. He says that “owning a non-controlling portion of a wonderful business is more profitable, more enjoyable – and far less work.”2

 

Fortunately, that’s also what it can be like to be an individual investor. While we may not be major shareholders, investors are often rewarded with a slice of the profit pie when we choose a well-run and profitable business. The key, of course, is to pick the right ones. Short-term investors may look to trade high risk for a quick profit, while longer-term investors may seek more reliable performance and give a company plenty of time to deliver. Sometimes it’s a matter of first figuring out what it is you want to accomplish with the money you make and then develop a strategy from there. Let us know if we can help.

 

One concept Buffett often reiterates is the need to hold a margin of safety when investing. Millions of people who lost their jobs during the pandemic learned just how narrow that margin of safety was within their own households. For those lucky enough to continue working, they may be even better off than before – simply because the pandemic shut down normal spending activities. That means many households are now in a position to reduce their debt and financial risks, and create an emergency fund they may not have had previously.3

 

Another hallmark move Buffett made in 2020 was an outsized buyback of Berkshire Hathaway’s own shares. The total 2020 tab came to $24.7 billion – compared to the combined total of $6.4 billion from the two prior years. Buffett noted that while he normally shies away from repurchases, the strategy offered “a simple way for investors to own an ever-expanding portion of exceptional businesses.” The strategy proved to be appropriate for an unpredictable year such as 2020.4

 

And finally, another key component of the shareholder letter was that Buffett admitted to making a big mistake in the past that came to a head in 2020. In 2016, Berkshire purchased aerospace-

parts manufacturer Precision Castparts for $37 billion. While he still believes the company is the leader of the aerospace industry and will generate solid returns in the future, Buffett cops to an earnings miscalculation that led him to pay too much for the company.5

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 

 

1 Yun Li. CNBC. Feb. 27, 2021. “Warren Buffett says ‘never bet against America’ in letter trumpeting Berkshire’s U.S.-based assets.” https://www.cnbc.com/2021/02/27/warren-buffett-says-never-bet-against-america-in-letter-trumpeting-berkshires-us-based-assets.html. Accessed March 8, 2021.

2 Warren Buffett. Berkshire Hathaway. Feb. 27, 2021. “To the Shareholders of Berkshire Hathaway Inc.” https://www.berkshirehathaway.com/letters/2020ltr.pdf. Accessed March 8, 2021.

3 Chris Farrell. Star Tribune. March 6, 2021. “Take advantage of this rare opportunity to reduce financial risk.” https://www.startribune.com/take-advantage-of-this-rare-opportunity-to-reduce-financial-risk/600031093/?refresh=true. Accessed March 8, 2021.

4 Aparna Narayanan. Investor’s Business Daily. Feb. 27, 2021. “Warren Buffett’s Key Investment Strategy Rests On These ‘Family Jewels’.” https://www.investors.com/news/warren-buffett-annual-letter-signals-maintaining-berkshire-hathaway-strategy-2021/. Accessed March 8, 2021.

5 James Leggate. Fox Business. Feb. 27, 2021. “In Warren Buffett’s annual letter he admits making this ‘big’ mistake.” https://www.foxbusiness.com/markets/warren-buffett-admits-making-this-big-mistake-in-annual-letter-to-investors. Accessed March 8, 2021.

 

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.

 

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

Wednesday, April 7, 2021

Annuity Insights


 The Insured Retirement Institute (IRI) – a trade association for the retirement income industry – advocates annuities as a vehicle that can help provide retirees income, guaranteed by the insurer. The organization has been actively educating and lobbying legislators to expand annuity access as part of employer-sponsored retirement plans.1 Under this scenario, whatever portion the investor contributes to an annuity option in his 401(k) would be eligible for distribution throughout his lifetime based on an estimated calculation of life expectancy.

A deferred annuity is a contract between an insurance company and an individual. The individual pays a one-time or ongoing premium in exchange for eventual payouts that include both return of premium plus interest.2

There are many types of annuities. They are complex and include additional fees and restrictions that make them more expensive than other types of investments. Then again, there are no other products that guarantee a combination of minimum income payout, an option for guaranteed income for life and a guaranteed death benefit. It’s important to work with a financial professional to ensure an annuity is appropriate for your situation, and to choose the best option. We would be happy to help you with that evaluation.

Outside of a qualified workplace plan, retirees may purchase an annuity to diversify their retirement portfolio. Historically, bonds offered guaranteed income that retirees could count on, but today’s lower yields have investors searching around for other alternatives. An annuity can offer a similar level of guaranteed income without market risk.

In a fixed-index annuity (FIA) an investor pays premiums to an annuity company, which then invests to earn enough money to distribute contractual payouts plus interest, as well as generate revenues to run the company and hold a general reserve fund. Because the insurer does the investing, it bears all the market risk. With an FIA, the investor’s principal is protected from market volatility and he receives a minimum interest guarantee.3

Some fixed-index annuities are linked to a specific index, such as the S&P 500. The insurer provides the annuity owner a certain percentage of the index’s return but limits any losses. That way the investor can earn more income in any given year, based on how well that index returns.4

Note that when the owner withdraws money from an annuity, regardless of whether it is part of or separate from a workplace retirement plan, the full distribution is taxed as ordinary income, not as long-term capital gains. However, note that when annuity interest is earmarked to pay for long-term care insurance premiums or qualified long-term care expenses, it may be withdrawn tax-free.5

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 


Mark Schoeff Jr. Investment News. March 4, 2021. “Insured Retirement Institute wants more worker access to plans, annuities.” https://www.investmentnews.com/insured-retirement-institute-wants-more-worker-access-to-plans-annuities-203567. Accessed March 4, 2021.

David Rodeck and John Schmidt. Forbes. Feb. 4, 2021. “What Is a Deferred Annuity?” https://www.forbes.com/advisor/retirement/deferred-annuity/. Accessed March 4, 2021.

Insurance News Net. March 3, 2021. “Are Annuities A Good Alternative To Bonds?” https://insurancenewsnet.com/oarticle/are-annuities-a-good-alternative-to-bonds. Accessed March 4, 2021.

Sandra Block. Kiplinger. Feb. 19, 2021. “The Case for Indexed Annuities.” https://www.kiplinger.com/retirement/annuities/602301/the-case-for-indexed-annuities. Accessed March 4, 2021.

Ken Nuss. Kiplinger. Feb. 12, 2021. “How Annuities Are Taxed.” https://www.kiplinger.com/retirement/annuities/602248/how-annuities-are-taxed. Accessed March 4, 2021.

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


Friday, April 2, 2021

Tax Pitfalls


Millions of Americans took advantage of the delayed tax-filing deadline in 2020. In fact, according to one survey, 11% of taxpayers filed their 2019 returns after the July 15 extension, and 3% still hadn’t filed as of last December. The primary reason most taxpayers file late isn’t due to procrastination, but rather because they owe taxes. Among them, 24% say they don’t have the financial ability to pay and 27% admit they didn’t want to.1

However, the bad news is that even if you file for an extension, you still have to pay your taxes on time, even if you must estimate the amount paid. Any back taxes owed after the filing date starts the clock on interest and penalties.

There are several ways to estimate your taxes and get them paid on time, and good reasons to do so. If you’re a W-2 employee, you can request to have your tax withholding changed at any time during the year to reflect changes in your income. If you’re self-employed, you simply change the estimated tax you pay each quarter to align with recent earnings. It’s better to pay taxes on time than run up a penalty tab that you’d otherwise be saving or spending elsewhere. If you’d like to learn about ways to use insurance products to minimize your tax liabilities, please contact us.

The 2020 tax season has several pitfalls due to the year’s poor economy and measures designed to alleviate its effects. For example, COVID-19 relief programs such as the CARES Act granted forebearance to many Americans carrying student loans and mortgages. Be aware that any amount of debt – including credit card debt – that is forgiven qualifies as taxable income in that year.2

Other income taxpayers must report include termination benefits, such payouts for unused sick days, vacation days or severance pay. Those amounts should be included on the W-2 your former employer provides. Furthermore, unemployment benefits paid by the government also are subject to taxation.3

Speaking of unemployment, it used to be that unemployment benefits would reduce a taxpayer’s eligibility for certain credits, such as the earned income tax credit (up to $6,600), and a refundable portion of the child tax credit (up to $1,400 per qualifying child). However, this issue was adjusted in light of so many people losing income last year. When filing a 2020 return, taxpayers have the option to use 2019 income to calculate their eligibility for tax credits.4

The good news is that if you were eligible for government stimulus checks last year and didn’t receive them, you can claim that money as a Recovery Rebate Credit on your 2020 return. The bad news is that if you are past-due on child support or unpaid student loans, the IRS can withhold some or all of that stimulus credit to offset the debt you owe.5

We take pride in assisting our clients with incorporating all aspects of their life into their Retirement Roadmap 360®. Take control of your financial future and give us a call at (734) 769-1719 today to see how we may be able to help you! 


1 Elizabeth Renter. NerdWallet. Feb. 2, 2021. “Tax Bills Drive Millions of Late 2019 Returns and 2021 Stress.” https://www.nerdwallet.com/blog/2021-tax-report/. Accessed March 4, 2021.

2 Kimberly Palmer. 23ABC News. March 3, 2021. “Unwelcome tax surprises may await those with debt.” https://www.turnto23.com/financial-fitness/unwelcome-tax-surprises-may-await-those-with-debt. Accessed March 4, 2021.

3S The Street. Feb. 25, 2021. “5 Tax Tips for When You’re Suddenly Faced with Unemployment.” https://www.thestreet.com/personal-finance/taxes/tax-tips-sudden-unemployment-turbotax. Accessed March 4, 2021.

4 Darla Mercado and Carmen Reinicke. CNBC. Feb. 15, 2021. “This tax pitfall could affect millions due to Covid. Here’s what you need to know.” https://www.cnbc.com/2021/02/15/beware-this-tax-pitfall-if-you-had-unemployment-income-during-covid-.html. Accessed March 4, 2021.

5 Alison DeNisco Rayome and Shelby Brown. CNET. Feb. 25, 2021. “6 stimulus check pitfalls to know about during tax season.” https://www.cnet.com/personal-finance/6-stimulus-check-pitfalls-to-know-about-during-tax-season/. Accessed March 4, 2021.

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