End of Year Deadlines Checklist

2020 has been one of the most unprecedented years in recent history, but some things—like tax contributions and retirement deadlines—don’t change much, if at all. And with the uncertainty surrounding just about everything, meeting these deadlines and getting tax efficiencies in place now may help the rest of the year run more smoothly. Read on for several things you’ll want to accomplish before 2020 draws to a close. Establish or Contribute to a Keogh Plan or Solo 401(k) A Keogh plan, or a tax-deferred pension plan that’s available to unincorporated businesses or the self-employed, allows contributions of up to $57,000 per year—far more than the $19,500 that can be contributed to a traditional 401(k).1 But to take advantage of these tax savings in 2021, the taxpayer must establish (and contribute to) a Keogh plan by December 31, 2020. Take Required Minimum Distributions (RMDs) Anyone with an IRA, 401(k), 403(b), 457, Simple IRA, or SEP IRA must begin withdrawing from these accounts at some point. These withdrawals, which are computed using the applicant’s age, life expectancy, and the total balance of the account, are known as RMDs, and are subject to income tax. The SECURE Act boosted the RMD age from 70.5 to 72. But because the penalty for failing to take an RMD (or for taking a distribution that’s too small) can be a 50 percent excise tax, missing this deadline can be an expensive mistake.2 As for the 2020 year, the CARES Act waived RMDs for IRAs and retirement plans, including beneficiaries with inherited accounts5. The waiver was also extended to individuals who turned age 70 ½ in 2019 and took their first RMD in 2020. Pay Expenses for

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Tax Benefits of Charitable Planning

When you donate to a charity, you want to know that your donation is going to its highest and best purpose—which means minimizing the tax exposure of the donated assets. One way to accomplish this, whether you’re hoping to donate during your lifetime, after your death, or both, is through a charitable remainder trust. Read on to learn more about the benefits of charitable planning through a charitable remainder trust. What is a Charitable Remainder Trust (CRT)? A CRT is a type of irrevocable trust that generates an income stream for the trust settlor or other beneficiaries, with the rest of the trust assets going to a named charity or charities. This essentially provides the trust settlor with a “life estate” in the donated assets while ensuring they can seamlessly pass through to the charity after the settlor’s death. Key Benefits of a CRT A CRT can be ideal for anyone who would like to make a difference through charitable giving—without necessarily losing the use of the assets in the interim. CRTs can be especially beneficial when funded with long-term, highly-appreciated assets that would otherwise be subject to some hefty capital gains taxes when sold or passed along via an inheritance. CRTs can be funded by cash, publicly-traded securities, real estate, and a few other types of complex assets. And if you’re not sure you’d like to commit to a single charity (or set of charities) for the lifetime of the trust, you can combine a CRT with a donor-advised fund (DAF), a mechanism by which charities can be added, omitted, or substituted at any time without any additional cost. CRTs also offer several tax benefits, explained in further detail

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Smart Shopping During the Holidays

The holiday season is just a short time away, which means the shopping season is about to be in full swing. Shopping for holiday gifts is stressful but also a little fun, especially when you think about the joy you will bring to those who receive them. But in all the rush to get everything done in time, it is easy to forget smart shopping techniques and over-spend or purchase a lot of items that you do not need. So this year, why not try some smart shopping tips to help you get everything you need, without the regret of having to pay it off after the holiday season? Start With a Plan Developing a plan is one of the easiest ways to make sure that you buy for everyone on your list with the money you have available to spend. Start your plan with a budget and then make a list of everyone you need to buy for. Next, come up with a few gift ideas for each person. Then, research pricing and find the gift for each one that will fit in with the amount you have budgeted for gifts. Stick to your list and avoid any last-minute splurges. Focus on the Big Sales Days While one of the most well-known shopping days to get amazing deals is Black Friday, don’t forget some of the other popular holiday shopping sales days such as Cyber Monday and Christmas Eve. If you are buying gifts for family or friends that you will not see until after the holidays, consider shopping the amazing sales the day after Christmas when the stores are deeply discounting their items to help reduce their surplus

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COVID-19 May Threaten the Recovery

A new wave of COVID-19 cases threatens to trip up the economy. Increasing cases in Europe and the United States have brought new restrictions on activities, but the market doesn’t appear to be fazed by the recent outbreaks. Progress on developing vaccines has provided a clear boost to sentiment, but prospects for a divided Congress and the potential for more fiscal policy support also may be playing a role. New Wave of COVID-19 Just as the economic recovery was beginning to gain some steam, COVID-19 cases have been rising dramatically in several regions around the world [FIGURE 1]. The change of seasons is adding to concerns, as colder weather shifts more activities indoors—increasing the chances of viral transmissions. This has prompted many governments to take greater action to try to curb the spread of COVID-19. Several countries and many states in the United States have rolled back reopening plans and implemented new restrictions such as school closures, nighttime curfews, and even stay-at-home orders. Economic Effects of Lockdown 2.0 The new round of restrictions, dubbed “lockdown 2.0,” has already begun to cause a decline in economic activity in the Eurozone. Markit’s composite Purchasing Managers Index (PMI) for the Eurozone, a survey of purchasing managers’ spending plans released November 23, slipped back into contractionary (sub-50) territory at 45.1, dragged down by the services component. Manufacturing activity remained expansionary at 53.6—highlighting the outsized effects that the COVID-19 outbreak has had on service industries. While the United States has not implemented the same degree of restrictions as Europe, rising cases already have had an effect on consumer and business behavior. Restaurant-booking data from OpenTable has declined since mid-October, and weekly jobless claims have begun to

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Frothy Sentiment Rides Bullish Technicals

The post-election environment and positive developments toward a COVID-19 vaccine have led to a surge in stock prices. The added clarity on these two fronts has boosted sentiment, which may present a risk in the near term as stock prices are near all-time highs. A November to Remember The reaction from stocks since the US election has been truly impressive. The S&P 500 Index is up 8.8% for the month, on pace to be the best November for the S&P 500 in 40 years. Small caps have also soared, with the Russell 2000 Index up 16%, which would be its second-best month ever. Although we remain longer-term bullish on equities, there are some signs that sentiment could be getting a little frothy at the moment, which could increase the odds of a pullback. Technicals Supportive of Future Strength On November 9, more than 71% of the stocks in the S&P 500 hit a one-month high, the third-highest reading using data back to 1990. Not only does this tell us that participation in the post-election rally has been extremely broad and not limited to only a few heavily weighted names in the index, but historically this has been an extremely positive signal for the next year. Returns can be quite weak in the near term after more than 65% of stocks reach a one-month high, but returns over the next 12 months not only have been far above average, but have been positive in all seven observed instances [Figure 1]. In fact, nearly every measure of breadth and participation we monitor shows a similar trend. Looking at longer-term indicators, 90% of the stocks in the S&P 500 are above their respective 200-day

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Ready to Retire? How to Know for Sure

Retirement is an exciting time for many, and the reward for years of hard work. While there is no set age for retirement, it is important to be prepared before you make the leap, so that you enjoy your retirement and financial stability during it. If you are considering retiring soon, below are some quick considerations to make to know for sure. Have You Secured Healthcare Coverage? One of the largest expenses during retirement could end up being your healthcare expenses, especially if you do not have a healthcare plan in place when you retire. While you will become eligible for Medicare at the age of 65, if you retire before then, you will want to find coverage to bridge the gap between the time your current coverage ends and Medicare coverage begins. You may want to look at the cost of private insurance, see if you are eligible to be on a spouse’s plan, or COBRA your current plan for a period of time after your employment ends. Always be sure to have some kind of medical coverage, even if it has a high deductible, as lack of coverage may lead to significant expenses. Have You Eliminated Most of Your Debt? Going into retirement with major debt may lead to you burning through your savings quicker than you anticipated. If you have stayed on top of your debt and have paid off your mortgage, lines of credit, large loans, and high credit card balances, you are likely in a good position to consider retirement. Do You Have Enough Money Saved? When planning for retirement, you likely had a retirement goal, which would provide you with at least roughly 75%

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IRA 101: Know the Facts

Individual retirement accounts (IRAs) are one of the most common assets people rely on to save and invest for retirement. In fact, more than a third of households in America own an IRA. If you’re thinking of opening an IRA for the first time, it’s a good idea to review the rules. Even if you have had an IRA for years, note that laws change. The Different Types There are two main types of IRA accounts to choose from: traditional and Roth. The timing of the tax advantages is the main difference between the two. For a traditional IRA, contributions are tax deductible and tax is paid upon withdrawal. Roth IRA contributions are taxed in the year they are made, and qualified withdrawals are tax-free. Both types are almost equally popular: 36% of American households have Roth IRAs 35% of American households have traditional IRAs 26% of American households contribute to both There are also employer-sponsored IRAs. These may fall into either of the two categories. Contribution Limits The IRS set a 2020 annual limit of $6,000 for people under 50 years old. People who are 50 years and older can make a total contribution of $7,000. What some breadwinners do to maximize contributions is to file joint tax returns and open a second account for their spouses. They then make additional contributions to this account. The IRS states that the combined contribution cannot exceed the lesser of the couple’s taxable income or the contributor’s individual limit times two. Eligibility The IRS considers net income from self-employment, gross wages and gross salaries as qualifying income. Too much income, however, and IRA contributions can get reduced or prohibited altogether: Qualifying Widower

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Q3 Results Brighten 2021 Picture

Corporate America delivered quite an encore to a surprisingly good second quarter earnings season with more of the same in the third quarter, despite a higher bar. S&P 500 Index companies didn’t quite match the biggest upside surprise ever—but they came close. We’re optimistic about the earnings recovery in 2021 and beyond, and outline five key takeaways for investors. An Encore Performance Earnings blew away expectations during the second quarter as the unprecedented COVID-19 lockdowns early in the quarter, followed by the uncertainty and unevenness of the reopening and limited guidance from corporate leaders, caused analysts to badly miss with their forecasts. In the third quarter, analysts had more information and the environment included fewer twists and turns, which should have made predicting results much easier. Still, analysts were overly pessimistic by nearly the same margin, as earnings results far surpassed expectations. Putting numbers to it, with more than 90% of S&P 500 companies having reported quarterly results so far, S&P 500 earnings are tracking to a 7.5% year-over-year decline, roughly 14 percentage points better than September 30 estimates (source: FactSet) [Figure 1]. Revenue is tracking to only a 1.7% year-over-year decline, a solid 1.9 percentage points above prior estimates. Other numbers put the strong third quarter into perspective: Big upside. The average S&P 500 company surpassed consensus earnings estimates by 19%. The second quarter’s 22% upside earnings surprise was the highest ever recorded by FactSet, and this quarter’s level—despite a higher bar—was not far behind. Average revenue upside of 2.6% is the highest FactSet has ever recorded (their data goes back to 2008). Broadly positive results. The percentage of companies beating earnings expectations stands at 84%, tied for the highest percentage since

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Six Keys to More Successful Investing

A successful investor maximizes gain and minimizes loss. Though there can be no guarantee that any investment strategy will be successful and all investing involves risk, including the possible loss of principal, here are six basic principles that may help you invest more successfully. Long-term compounding can help your nest egg grow It’s the “rolling snowball” effect. Put simply, compounding pays you earnings on your reinvested earnings. The longer you leave your money at work for you, the more exciting the numbers get. For example, imagine an investment of $10,000 at an annual rate of return of 8 percent. In 20 years, assuming no withdrawals, your $10,000 investment would grow to $46,610. In 25 years, it would grow to $68,485, a 47 percent gain over the 20-year figure. After 30 years, your account would total $100,627. (Of course, this is a hypothetical example that does not reflect the performance of any specific investment.) This simple example also assumes that no taxes are paid along the way, so all money stays invested. That would be the case in a tax-deferred individual retirement account or qualified retirement plan. The compounded earnings of deferred tax dollars are the main reason experts recommend fully funding all tax-advantaged retirement accounts and plans available to you. While you should review your portfolio on a regular basis, the point is that money left alone in an investment offers the potential of a significant return over time. With time on your side, you don’t have to go for investment “home runs” in order to be successful. Endure short-term pain for long-term gain Riding out market volatility sounds simple, doesn’t it? But what if you’ve invested $10,000 in the

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How Entrepreneurs Can Stay Nimble in the COVID Era

When one door closes, another opens—and entrepreneurs who keep this mantra in mind are more likely to remain on top once the world has moved beyond the novel COVID-19 pandemic. What can business owners and other entrepreneurs do to adapt to a consistently shifting set of circumstances? Identify and Adapt to New Market Needs COVID-19 has majorly reshaped the way Americans go about many parts of their everyday lives, from grocery delivery to telemedicine. Some consumers have expressed their preference for many aspects of the “new normal,” particularly those that provide greater convenience or allow them to spend time focusing on more pressing matters. This means that if you’re still trapped in the “business as usual” rut six months or more into this pandemic, it may be time to make some changes. If you’re able to identify new market needs among the demographics you serve, you may find that your business is uniquely well-positioned to meet these needs during the COVID-19 pandemic. Companies that adapt and find ways to meet their customers where they are, rather than where they were pre-COVID, are the most likely to thrive in the post-pandemic economy. Get Out of Survival Mode Nationwide shelter-in-place orders in early 2020 sent many entrepreneurs scrambling to find a way to stay afloat amid an uncertain future. But as the pandemic now appears to be in for the long haul, it’s time to break out of “survival mode” and begin to make the types of long-term decisions that are a key part of the entrepreneurial package. By planning your next moves now, even if the situation continues to evolve, you’ll be in a better spot to make tough decisions down the road. Revisit Your Business

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