Breaking News: Charles Schwab Acquires TD Ameritrade

TD Ameritrade is our primary custodian. They hold almost all of our client investment accounts. On Monday, they announced a deal with Charles Schwab.

Video: Schwab Acquires TD Ameritrade

Here are some highlights:

  • The deal is reported to be $26 Billion and is an all stock acquisition.
  • This will be the largest custodian for independent registered investment advisors. The combined company will hold over $5 Trillion of client assets.
  • When we created our own firm in 2016, we considered TD Ameritrade, Charles Schwab and Fidelity.  We felt TD was a better fit for us and for our clients.
  • We hope the merger will combine the best parts of Schwab with what we like about TD Ameritrade.
  • We don’t anticipate this to disrupt our clients.
If you have questions or concerns, please call.  (740)  373-4877 or (800) 860-4871

You can also email us at neal@flemingwatson.com or jim@flemingwatson.com

Year End Tax Tips for 2019

Only five weeks remain this year.  Today we offer some year end tax tips for 2019.  On this show we talk about:

  • Loss Harvesting
  • Qualified Charitable Distributions
  • And Capital Gains Distributions from Mutual Funds

Watch: Year End Tax Tips for 2019

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Year End Tax Tip #1 for 2019: Loss Harvesting

Year End Tax Tips for 2019

Let’s start with something called “loss harvesting.” If you own an investment that has decreased in value, you might be able to sell it and reduce your taxes. Here is how this works.

First, the investment can’t be in an IRA or a 401(k). It has to be in a taxable account.

Secondly, if it has decreased below what you paid for it, this is called your cost basis, you can sell it and reduce your tax liability.

Any losses you generate will offset capital gains. But, you can also use up to $3,000 of capital losses against your other income. The rest you typically carry forward to next year. You can use it against prior years taxes, but that gets more complicated.

Here is an important thing to remember. You can’t buy the same position within 30 days of the sale. So let’s say you sold Ford stock for a loss. You have to wait more than 31 days to buy it back. Otherwise, you have a wash sale and your losses will be disallowed.

Now, here is the issue. When the investment markets have been very strong like they have this year, it can be difficult to find those losses. But you may still have them and it might make sense to take advantage of them.

Year End Tax Tip #2 for 2019: Qualified Charitable Distributions From An IRA

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The next thing to consider is a qualified charitable distribution from your IRA. There are some very specific rules for this and here are the basics.

First, you must be at least 70 1/2.

Secondly, the funds must go from your IRA directly to the charity of your choice.

How does this help you? Well you don’t have to report the distribution as income. So if you aren’t spending your required minimum distribution, this may be able to save you some money.

Year End Tax Tip 3 for 2019: Watch Out For Capital Gains Distributions

Year End tax Tips for 2019 3

This last item isn’t so much something that can save you money, but may help you avoid some trouble next spring.

If you own actively managed mutual funds in a taxable account, pay attention to capital gains distributions. These happen when the fund managers buy and sell positions in the fund. By law, they must distribute those proceeds to their shareholders.

Here is where the potential problem lies.

  1. In good years like this, those gain distributions can be large.
  2. Most of the time, investors automatically allow those distributions to reinvest. This means they buy more shares of the fund.
  3. If they are big enough, it could cause a cash crunch next spring. What this means is your refund could be smaller, or you may owe more than you were expecting.

So how do you deal with this? Unless you sell your position, you can’t avoid the gains. But you may want to take the distribution in cash instead. This can help you avoid the cash crunch and allow you to diversify your holdings a little.

Take some time in the next few weeks to talk to your tax expert or your financial advisor. Planning ahead can help you save money or avoid a potential headache later.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos And Posts

Is Gold A Good Investment?

Is gold a good investment?  We answer a listener question about the shiny metal.  We will discuss:

  • Where gold really shines
  • Some potential costs
  • And things to consider when deciding if it is right for you.

Watch: Is Gold A Good Investment?

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Today, Jerry asks this question, “With all of the wild moves in the stock market, a political mess, and these low-interest rates, should I be using gold?”

All that glitters is gold, or is it? As an asset class, the shiny metal tends to get a lot of attention.  In most cases, it rises to popularity when the doom and gloom sets in. And when pessimism is high, it’s not uncommon to see and hear a lot of advertisements for it.

But is gold a good investment? It’s beauty is in the eye of the beholder.

Where Gold Really Shines

At times gold, does well when stocks don’t. For example, during the dot com bust in 2000-2002, gold generated a total return of a little over 20%. US stocks declined more than 37% over that same three-year time frame.

In 2008, the US stock market was down 37%. Gold increased by 5%.

So it can be a good investment for diversification.

Is Gold A Good Investment
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Where Gold Loses its Luster

But there are a few drawbacks. Many people we talk to believe gold offers a level of safety. The data paints a different picture. Like stocks, gold has some extreme declines. The most recent one happened between 2013 and 2015. During those three years, gold dropped more than 37%. It isn’t as safe as people want to believe.

Is Gold a Good Investment-1315

Be Aware of the Costs

The other issue with gold stems from how you buy and sell it. If you wish to buy coins or bullion, transaction costs can eat into your returns. Those fees and commissions have decreased through the years, but they are still a factor.

One way to reduce those costs is to use an exchange traded fund designed to track the price of gold. Some funds own the metal. And we know of one fund who will actually deliver the metal to you when you redeem your shares.

The internal costs of these funds are small. In addition, the major discount brokers now offer zero commission trades for ETF’s. That also can keep your costs lower.

Buying gold in an individual retirement account can also be a hassle or result in extra fees. Not every custodian will hold the physical metal. And those who do will charge fees for storage and other services. Again this is where using ETF’s can make things much simpler and cost-effective.

Is Gold a Good Investment for You?

Gold can be a good part of your nest egg, as long as you understand the whole picture. It can be a buffer against stock market volatility. But don’t expect it to be completely safe either.

And you have to decide how you want to invest. Buying the actual metal adds costs and complexities to your situation.

After you’ve done your research and understand the ins and outs, you can make the choice.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Watch: A Fishy CD Ad

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Recently, the Federal Reserve reduced short term interest rates, again. And this move impacts savers in a big way. Earlier in the year, we were able to find short term CD’s—meaning 1 year or less—with an annual yield of 2.3% or higher.

Since then we’ve seen those rates drop significantly. The national average annual yield for 6 month CD’s is 0.91%. The highest annual yield reported is 1.85% to 1.9%.  If you are a saver, this low-interest-rate environment is awful. CD buyers are begging for any kind of yield right now.

A Fishy CD Ad

Recently, a client asked us about an ad he saw in a newspaper in Myrtle Beach. The advertised rate for a CD was over 3.5%. That’s almost 4 times the national average. And it is nearly double the highest reported rate by bankrate.com.

An ad like this is going to get people’s attention.

But things like this also make the alarms go off in our head. What is this company doing that allows them to offer a CD with this kind of yield? So we did a little digging, and to no surprise things look a bit suspicious.

1.  It’s Not A Bank Running The Ad

The first thing of note, this isn’t a bank advertising this. Brokerage firms have access to FDIC insured CD’s. And at times those rates are better than what local banks offer. But, when the advertised rate is this much larger?  It raised an eyebrow.

2.  An Insurance Agency Advertises This.

The second thing which got our attention: The company running the ad primarily sells insurance products. And this made us dig a little deeper.

We found this gimmick has been around for a few years. Here is how it works.

The Gimmick

The agency has an ad for a 3.5% 6 month CD. You want to invest $10,000 in one. The agency buys a CD for 1.3%. After 6 months, the bank issuing the CD pays you $65. The agency then pays you $110. You get your 3.5% yield.

A Fishy CD Ad

CAUTION! High Pressure Sales Tactics Ahead

For that $110, the insurance agency gets a captive audience with a yield-hungry, conservative saver. Then they use high-pressure sales tactics for annuities and other insurance products.

Ads like this aren’t necessarily a scam.  But the tactics push ethical boundaries. These agencies design these ads to get your attention and get you in the door. You see, they’ll only talk to you about this in person. And when they have you sitting in front of them, they can put on the full court press to try and sell you something else.

Many times, what they are selling is not always in your best interest. So, if you see an ad like this, be careful. Remember, if it sounds too good to be true, it probably is. And if you are in doubt, talk to an advisor you know and trust.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Watch Now

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