It is the time of year when numbered and lettered forms are arriving in your mailbox.
February 2021 Newsletter
Dear Friends and Clients:
Rob Lovelace on the Year Ahead
We are enclosing an article written by Rob Lovelace of the American Funds. He has been a portfolio manager for nearly thirty years, and he provides his outlook for the year ahead. Follow the link and I believe you will find an interesting read.
It is the time of year when numbered and lettered forms are arriving in your mailbox. February 1 and 15 and March 15 stand out as dates, but the custodians sometimes receive exceptions to the rules giving them additional time to mail those forms. It pays to be a procrastinator here. Forms are corrected and reissued as February through April passes. The procrastinator might have the final corrected form with fewer concerns about future amendments to taxes when he decides to file his.
You may receive some or all forms in the regular mail, but frequently they are “e mailed” electronic forms which you must print. If you have any problems, just call us, and we can print and mail to you. If you wonder about paying taxes on the sale of stocks and whether you have the correct information, check with us. Please give your tax preparers permission to ask us these questions directly. It will save all of us time and confusion.
Saving on Income Taxes
Hard to do, frankly. Think long term, stay invested, buy the companies, not the trends. After 40 years in the business, I believe that capital gains have more income lasting benefits than many other forms of income. There is discussion about raising income taxes under the new administration; Kiplinger Tax Letter thinks it will not be likely in 2021. That is a short window. There is talk about raising the minimum wage to $15.00 an hour but I doubt most people realize the government claims 15.3 % of that money so the government gets a raise also. Almost every government program has a complicated final result that takes away some of the benefits. The “richer you become, the more evil you must be” seems the mantra of many. But we repeat, “Spend less than you earn, invest in the best companies you can find, and admire and learn from those who have achieved success in a complicated world.” One day we will do a newsletter on companies that remain debt free – it is possible, and they are lovely to observe.
Regarding RMD’s out of retirement plans
In 2020 everyone who chose could skip taking a required minimum distribution. This year it is back to taking the RMD…and paying consequential income taxes. If you are getting close to beginning distributions from your IRA, the new rules are age 72. When you turn 72 in any year, take the RMD under the new chart rules unless there is some reason to know your 2023 income will be very low and you can afford to take two distributions in the upcoming year.
Crazy Things That People Do
No, we don’t know much about “Game Stop.” But, yes, we’ve seen this happen before. It pops up every so often. (About 22 years ago to a similar experience.) The Wall Street Journal writes that a few people earned money and paid off debt. (I hope so.) Others lost money. “Short sales” have their purpose, but they can become hugely speculative. And Bitcoin? Interested? We do not embrace them early on. They must prove themselves and leave us the “crumbs.” But crumbs can lead one home (Hansel and Gretel, right?) Example: there has been plenty of time to get into Apple – more than once – and you probably own it in a mutual fund now.
When we have a rising or bull market, you will view many exhilarating experiences, but you may lose your money if you participate at the wrong time. Any market can become highly speculative, but we continue on, working long term where clients also say, “I never expected to have this much money.” It may seem slow at times, but then again, AMAZING, when experienced!
Continuing on in this difficult world of investing, it is possible to weave a careful path through the mine fields.