Wealth Managers Under 40 by Fortune Magzine
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Congratulations to Offit Advisors Principal Ben Offit on being named a Top Wealth Manager Under 40 by Fortune Magazine. Look out for the February or March issue of Fortune Magazine, where Ben will be featured!
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Award candidates who satisfied 10 objective eligibility and evaluation criteria were named 2021 Five Star Wealth Managers. Eligibility Criteria - Required: 1. Credentialed as a registered investment advisor or a registered investment advisor representative. 2. Actively employed as a credentialed professional in the financial services industry for a minimum of five years. 3. Favorable regulatory and complaint history review. 4. Fulfilled their firm review based on internal firm standards. 5. Accepting new clients. Evaluation Criteria - Considered: 6. One-year client retention rate. 7. Five-year client retention rate. 8. Non-institutional discretionary client assets administered. 9. Number of client households served. 10. Education and professional designations.
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if you were trying to get public student loan forgiveness in the past and were denied, there may be new hope for you! If you were working for a 501c3 organization or government entity or still are and you had public student loans, between now and next October you may be able to do an audit and get back payments considered as eligible towards the 120 required payments to be considered for Public Student Loan Forgiveness (PSLF)! If you think this situation may apply to you, you should jump on this immediately because FedLoan is still the servicer on student loans and that may change in January and all of the records could be lost. If you want to have a deeper consultation about this, please let us know!
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- This year, the government collected $627 billion more in tax revenue than it did in fiscal 2020, pulling in a record-high $4.05 trillion. TheRightFacts
- In seven years, Amazon has grown from a zero share of the U.S. shipping market to 21%, surpassing FedEx at 16%. The US postal service remains dominant with 38%, while UPS accounts for 24%. Yahoo!Life, October 21, 2021
- The wait for micro-chips from order to delivery is now at a record 21.7 weeks. Bloomberg, October 6, 2021
- In the United States, of every dollar spent on food, just 14.3 cents goes to farmers. National Farmers Union
- “The reason life works at all is that not everyone in your tribe is nuts on the same day.” Anne Lamott
- “I’m giving up drinking until Christmas. Sorry, wrong punctuation. I’m giving up. Drinking until Christmas.” Anonymous
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Helpful Tax Advice as 2021 Comes to a Close
by Ken Savell, Tax Advisor
Hi Everyone!
With year-end approaching, it is time to start thinking about moves that may help lower your tax bill for this year and next. This year’s planning is more challenging than usual due to the uncertainty surrounding pending legislation that could, among other things, increase top rates on both ordinary income and capital gain starting next year. Whether or not tax increases become effective next year, the standard year-end approach of deferring income and accelerating deductions to minimize taxes will continue to produce the best results for all but the highest income taxpayers, as will the bunching of deductible expenses into this year or next to avoid restrictions and maximize deductions.
If proposed tax increases do pass, however, the highest income taxpayers may find that the opposite strategies produce better results: Pulling income into 2021 to be taxed at currently lower rates, and deferring deductible expenses until 2022, when they can be taken to offset what would be higher-taxed income. This will require careful evaluation of all relevant factors.
We have compiled a list of actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all of them will apply to you, but you (or a family member) may benefit from many of them.
Please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves might be beneficial:
• Higher-income individuals must be wary of the 3.8% surtax on certain unearned income. Pending legislative changes to the 3.8% net investment income tax proposed to be effective after this tax year would subject high income (e.g., phased-in starting at $500,000 on a joint return; $400,000 for most others) S shareholders, limited partners, and LLC members. Accelerating some of this type of income into 2021 could potentially be beneficial.
• Long-term capital gain from sales of assets held for over one year is taxed at 0%, 15% or 20%, depending on the taxpayer's taxable income. If you hold long-term appreciated-in-value assets, consider selling enough of them to generate long-term capital gains that can be sheltered by the 0% rate.
• Postpone income until 2022 and accelerate deductions into 2021 if doing so will enable you to claim larger deductions, credits, and other tax breaks for 2021 that are phased out over varying levels of AGI. These include deductible IRA contributions, child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income also is desirable for taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may actually pay to accelerate income into 2021. For example, that may be the case for a person who will have a more favorable filing status this year than next (e.g., head of household versus individual filing status), or who expects to be in a higher tax bracket next year. That's especially a consideration for high income taxpayers who may be subject to higher rates next year under proposed legislation.
• If you believe a Roth IRA is better for you than a traditional IRA, consider converting traditional-IRA money invested in any beaten-down stocks (or mutual funds) into a Roth IRA in 2021 if eligible to do so. Keep in mind that the conversion will increase your income for 2021, possibly reducing tax breaks subject to phaseout at higher AGI levels. This may be desirable, however, for those potentially subject to higher tax rates under pending legislation.
• It may be advantageous to try to arrange with your employer to defer, until early 2022, a bonus that may be coming your way. This might cut as well as defer your tax. Again, considerations may be different for the highest income individuals.
• Many taxpayers won't want to itemize because of the high basic standard deduction amounts that apply for 2021 ($25,100 for joint filers, $12,550 for singles and for marrieds filing separately, $18,800 for heads of household), and because many itemized deductions have been reduced or abolished, including the $10,000 limit on state and local taxes; miscellaneous itemized deductions; and non-disaster related personal casualty losses. You can still itemize medical expenses that exceed 7.5% of your AGI, state and local taxes up to $10,000, your charitable contributions, plus mortgage interest deductions on a restricted amount of debt, but these deductions won't save taxes unless they total more than your standard deduction. In addition to the standard deduction, you can claim a $300 deduction ($600 on a joint return) for cash charitable contributions.
• Some taxpayers may be able to work around these deduction restrictions by applying a bunching strategy to pull or push discretionary medical expenses and charitable contributions into the year where they will do some tax good. For example, a taxpayer who will be able to itemize deductions this year but not next will benefit by making two years' worth of charitable contributions this year. The COVID-related increase for 2021 in the income-based charitable deduction limit for cash contributions from 60% to 100% of MAGI assists in this bunching strategy.
• Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2021 deductions even if you don't pay your credit card bill until after the end of the year.
• If you expect to owe state and local income taxes when you file your return next year and you will be itemizing in 2021, consider asking your employer to increase withholding of state and local taxes (or make estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2021. But this strategy is not good to the extent it causes your 2021 state and local tax payments to exceed $10,000.
• Required minimum distributions RMDs from an IRA or 401(k) plan (or other employer-sponsored retirement plan) have not been waived for 2021, as they were for 2020. If you were 72 or older in 2020 you must take an RMD during 2021. Those who turn 72 this year have until April 1 of 2022 to take their first RMD but may want to take it by the end of 2021 to avoid having to double up on RMDs next year.
• If you are age 70½ or older by the end of 2021, and especially if you are unable to itemize your deductions, consider making 2021 charitable donations via qualified charitable distributions from your traditional IRAs. These distributions are made directly to charities from your IRAs, and the amount of the contribution is neither included in your gross income nor deductible on Schedule A, Form 1040.
• Consider increasing the amount you set aside for next year in your employer's FSA if you set aside too little for this year and anticipate similar medical costs next year.
• If you become eligible in December of 2021 to make HSA contributions, you can make a full year's worth of deductible HSA contributions for 2021.
• Make gifts sheltered by the annual gift tax exclusion before the end of the year if doing so may save gift and estate taxes. The exclusion applies to gifts of up to $15,000 made in 2021 to each of an unlimited number of individuals. These transfers may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.
• If you were in federally declared disaster area, and you suffered uninsured or unreimbursed disaster-related losses, keep in mind you can choose to claim them either on the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or on the return for the prior year (2020), generating a quicker refund.
• If you were in a federally declared disaster area, you may want to settle an insurance or damage claim in 2021 to maximize your casualty loss deduction this year.
These are just some of the year-end steps that can be taken to save taxes. Let us know if you have any questions!
Reprinted with permission from Ken Savell, Tax Advisor, and Bloomberg. Copyright ©2021 www.bloomberg.com
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New Highs in October as September Volatility is Short-Lived
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HIGHLIGHTS:
- As quickly as volatility came, it dissipated in October. After hitting an intraday high of 25.6 in September, the VIX Index, a measure of volatility, traded below 15 in October – the lowest intraday mark since early July. It settled the month at 16.26.
- Equities bounced back strongly from declines in September. Large-cap growth was particularly in favor in October, but equities across the board advanced.
- The 10-year U.S. Treasury yield moved modestly higher in October, closing the month at 1.55% compared to 1.52% at the end of September. Yields rose sharply during most of the month, closing 10/21/21 at 1.68%, but the last several days of the month saw yields move lower.
- The U.S. economy is still recovering, but as expected, the rate of growth has slowed as evidenced by the initial read of 2.0% annualized GDP growth in the third quarter.
- The Delta variant and ongoing supply chain issues appear to be causing an additional short-term headwind to economic growth, but we expect fourth quarter growth to improve from the Q3 level. Volatility, however, could stay elevated with markets once again at all-time highs and a showdown over government funding looming.
EQUITY MARKETS
The sharp drop in stocks in September was more than equaled by their strong rebound in October. The Dow Jones Industrial Average, the S&P 500 and the NASDAQ Composite put in new all-time highs in October (and surpassed those with new highs on November 1). Large-cap growth outperformed in October in a bit of a rewind to most of 2020. The year-to-date numbers now favor growth stocks in the large-cap space, but value still rules in the mid and small-cap universe.
The VIX Index closed September at 23.14, but that dropped significantly to 16.26 by the end of October. Our expectation of a more volatile second half of 2021 started to materialize in September, but October proved to be much less so. We believe investors should be prepared for ongoing periods of volatility over the next several months with stocks at all-time highs, supply chain issues pushing prices higher, and a Fed likely to announce and begin its tapering of bond purchases in November.
Size and style mattered once again in October, but all major categories of equities advanced during the month. We still believe that the value/growth disparity that reached a peak last year will likely continue to shift in 2021 with value improving on a relative basis. We continue to use our disciplined approach of seeking out what we believe to be high-quality companies with improving business conditions at what we believe are good prices.
The numbers for October were as follows: The S&P 500 gained 7.01%, the Dow Jones Industrial Average rose 5.93%, the Russell 3000 advanced by 6.76%, the NASDAQ Composite rallied 7.29%, and the Russell 2000 Index, a measure of small-cap stocks, improved by 4.25%. Through ten months of 2021, returns in the same order were as follows: 24.04%, 18.77%, 22.77%, 20.88%, and 17.19%, respectively.
We will continue to monitor how trends shift in the coming months and whether the recent gains in large-cap growth stocks develop more footing or whether small and mid-cap stocks, along with value, return to their recent leadership roles. September saw value and small-cap stocks perform relatively better than large-cap growth, but that shifted once again in October with large-cap growth leading the way.
Looking closer at style, the headline Russell 1000 Index gained 6.94% for the month with a year-to-date gain of 23.18%. The Russell 1000 Growth Index rallied by 8.66% in October and is up 24.20% year to date. The Russell 1000 Value Index relinquished its leadership position by gaining “only” 5.08% in October, which put the year-to-date total at 22.03%. For small-caps, value continued to outperform growth on a relative basis. The value/growth disparity is much more pronounced in small-caps for the year to date with the Russell 2000 Value Index up 27.60%, while the Russell 2000 Growth Index has gained a mere 7.64% during the same timeframe.
International markets lagged U.S. stocks in October, but developed markets were able to recover some of the weakness in recent months. The MSCI Emerging Markets Index gained only 0.99% in October, which keeps this index in negative territory (down -0.27%) for the year to date. The MSCI ACWI ex USA Index, a broad measure of international equities, gained 2.39% in October, which pushed year to date results to 8.43%. Following the trend of recent years, U.S. stocks have continued to outperform their international counterparts. Within international markets, developed countries have done better than emerging markets, which have been weighed down by China.
FIXED INCOME
After surging higher during the first quarter of 2021, the yield on the 10-year U.S. Treasury dropped over the next four months. That streak ended in August as yields moved higher and that move higher continued in September. October saw a modest continuation in this trend. The yield closed the month of September at 1.52% and it rose to 1.55% by the end of October. Bond sector results were rather mixed with this modest increase in rates.
Fixed income returns were as follows for October: the Bloomberg Barclays U.S. Aggregate Bond Index slipped -0.03%, the Bloomberg Barclays U.S. Credit Index gained 0.22%, the Bloomberg Barclays U.S. Corporate High Yield Index was off by -0.17% and the Bloomberg Barclays Municipal Index dropped -0.29%. For the year to date, those index returns in the same order were as follows: -1.58%, -1.09%, 4.36%, and 0.50%, respectively.
High yield bonds remained the clear leader year to date and municipals have been able to sneak out a slight gain as well. The 30-year U.S. Treasury Index gained 3.42% for the month, as the 30-year yield dropped during the month, but it is still off by -5.78% year to date. The general U.S. Treasury Index fell by -0.07% in October and is down -2.56% year to date. We continue to maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment.
Source: Clark Capital Benchmark Review, September 2021
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S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.
Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.
NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices.
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.
Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value.
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Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Offit Advisors is not affiliated with Kestra IS or Kestra AS. Offit Advisory Services, LLC is a tax firm but neither Kestra IS nor Kestra AS provide legal or tax advice and are not Certified Public Accounting firms.For more information on the Five Star Wealth Manager and the research/selection methodology go to: www.fivestarprofessional.com. Investor Disclosures: https://bit.ly/KF-Disclosures
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