Money Trailguide, No. 6

It’s the most wonderful time of the year…agree or disagree?  I tend to look forward to the nostalgia that comes with the cooler temperatures, greenery and twinkling lights.  And yet we find ourselves still in strange times which prompts me to be even more introspective about what matters most this season.  I hope you do the same as well.  Wishing you and yours all that you hope for this holiday season!

Lots of really good content below…included this month are:

  • Quick hits…What I’m Reading
  • Spreading Meaning this Holiday Season
  • Six Financial Best Practices for Year-End 2021

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Joshua E. Self, CLU, ChFC, CFP®

Managing Partner

Quick Hits…What I’m Reading

  • God Is In the Manger: Reflections on Advent and Christmas – Dietrich Bonhoeffer…regardless of religious affiliation, this book contains writing from the 19th century theologian, Bonhoeffer, many written during his captivity in Nazi concentration camps. The juxtaposition of reflections on the season with WWII and Nazi Germany as a backdrop is very thought-provoking.

Spreading Meaning this Holiday Season: A Life Worth Living

Have you ever noticed, when people speak about meaning or direction, they usually talk about finding it, discovering it, or adding it to their life?

What if that’s not how it works? Rather than casting about for meaning, maybe it’s already there, happening all the time:

“The greatest things in the world are brought about by other things which we count as nothing: little causes we overlook but which at length accumulate.”
— Georg Christoph Lichtenberg, 1742–1799  The Waste Books

We’re financial advisors, not philosophers. But like you, we sometimes wonder about those greater things. Perhaps that’s one reason the holidays are special. They grant us the time and space to step away from the daily fray, to have a better look around.  You do not have to look far to see the impact of even the smallest acts of kindness:

“When we smile at someone, we leave a tiny imprint on that person’s brain. Somewhere, deep within their motor cortex, their brain is smiling back.”
— Helen Thomson, contemporary author  Unthinkable

What happens when small acts of kindness are done over and over again?  Sounds like Jolly Old St. Nick, doesn’t it?  I have always been interested in history.  The real Saint Nicolas is no different, and as is usual, the facts are stranger (and much more interesting) than the fiction.  I suggest you take 10 minutes to read this National Geographic article on the origins of Santa Claus from a few years ago.  It is well documented and an interesting read.

Additionally, this site also has additional historical details on the original Saint Nicolas who lost everything at an early age, and yet, still found his way to overwhelming generosity.  This could be why he is the patron saint for so many different groups (from children to bankers to mariners to orphans to even thieves and murderers!).  I find this 4th century man, who stood up for what he believed in the face of a tyrant (the Roman emperor, Diocletian) very compelling and very inspiring.  He was jailed, and likely abused, for years before being freed by the Roman emperor Constantine.  In a wild turn of events, he was later invited to join many other church leaders to the Council of Nicea in AD 325.  It was here that he participated in proceedings that set church doctrine for centuries to come with the goal to maintain unity within the church.  Not a small undertaking, no matter the century!

Without a doubt, the world is a daunting place. Each of us has endured our own heartbreaks; the wider daily news can grind us down as well.  Perhaps St. Nick (you choose whether the old or the new) is but a small inspiration today for you today.  Use that inspiration to leave an imprint on someone’s brain with your smile or even a sack of gold coins in their stockings in front of the fireplace.  I’m sure they would appreciate either.

Six Financial Best Practices for Year-End 2021

Believe it or not, another year has rounded third base, and is dashing toward home plate. That said, there’s still time to make a few good plays in 2021, while positioning yourself to score more in the year ahead. Here are six financial best practices for the record books.

  1. Keep Your Eye on the Ball. While there are always distracting trading temptations, it seems as if 2021 has had more than its fair share of them. Remember the January excitement over GameStop and its ilk? Tradeable memes and non-fungible tokens (NFTs) became a thing around then too, followed by the pursuit of fluffy little dogecoins.Our Best-Practice Advice: Instead of swinging at fast fads, we encourage you to lean into the returns our resilient global markets are expected to deliver over time. As always, this means looking past the wild throws and building a low-cost, globally diversified portfolio, tailored for your personal financial goals and risk tolerances. Isn’t that your aim to begin with?
  1. Revisit Your Saving and Spending. COVID changed a lot of things, including our saving and spending patterns. Stimulus and unemployment checks offered cash flow relief for many families. Businesses owners received generous loans. Moratoriums on paying off college debt or being penalized for dipping into retirement savings helped as well. Retirees were permitted to skip taking Required Minimum Distributions (which is NOT the case in 2021).Our Best-Practice Advice: As these and similar relief programs wind down, now is an excellent time to recalibrate your own financial plans. If you borrowed from your future self by withdrawing from or not adding to your retirement reserves, please establish a disciplined schedule for paying yourself back. If you became accustomed to spending less on items you used to think you couldn’t live without, try directing those former expenditures to restoring your retirement and rainy-day funds. Every little bit counts!
  1. Watch for Fund Distributions. Even as we’ve continued to weather the pandemic storm, our forward-looking, global markets have been delivering relatively strong returns year-to-date for many foreign/U.S. stock funds. That’s good news, but it also means mutual funds’ capital gain distributions may be on the high side this year. Capital gain distributions typically occur in early December, based on the fund’s underlying year-to-date trading activities through October. For funds in your tax-sheltered accounts, the distributions aren’t taxable in the year incurred, but they are for funds held in your taxable accounts.Our Best-Practice Advice: Taxable distributions aside, staying put to earn all potential market returns is the more important determinant in our buy-and-hold approach. With that said, in your taxable accounts only, if you don’t have compelling reasons to buy into a fund just before its distribution date, you may want to wait until afterward. On the flip side, if you are planning to sell a fund anyway—or you were planning to donate a highly appreciated fund to charity—doing so prior to its distribution date might spare you some taxable gains.
  2. Consider Tax Gain Harvesting. Along with relatively strong year-to-date market performance, many Americans are also benefiting from historically lower capital gain and income tax rates that may or may not last. Often, taxpayers view each tax season in isolation, seeking to minimize taxes owed that year. We prefer to view tax planning as a way to reduce your lifetime tax bill. Of course, we can’t know what your future taxes will be. But it can sometimes make good, big-picture sense to intentionally generate taxable income in years when tax rates seem favorable.Our Best-Practice Advice: If you have “room” to take some taxable capital gains this year—and if it actually makes sense for you to take them—you may want to consider working with your tax planning team to do so.
  1. Seize the Day on Your Charitable Giving. Unlike many other pandemic-inspired tax breaks, several charitable-giving incentives still apply for 2021, but may not moving forward. This includes the ability for single/joint filers to deduct up to $300/$600 in cash contributions to qualified charities, even if they’re already taking the standard deduction on their tax return. If you’re so inclined, you also can still donate up to 100% of your AGI to qualified charities.Our Best-Practice Advice: Charitable giving remains another timeless tactic for offsetting taxable capital gains you may want or need to report, as well as any other extra taxable income you may be incurring. And charitable organizations need our contributions as sorely as ever. So, if you’re charitably inclined, you may as well make the most of your generosity by pairing it with your 2021 tax planning.
  1. Plan Ahead for Estate Planning. Holiday shoppers may not be the only ones facing supply chain shortages this year. Estate planning attorneys, CPAs, and similar planning professionals may also be in shorter supply toward year-end and beyond. In addition to the usual year-end crunch, many such service providers have been extra busy responding to a “COVID estate planning boom,” as well as to the fast-paced action in Washington.Our Best-Practice Advice: If you’ve been thinking about revisiting your estate or tax planning activities, know that the process may take longer than usual. Especially if you’re planning for changes that are up against a hard deadline (such as year-end or April 15th), you’ll benefit yourself by giving your attorney, accountant, and others the time they need to do their best work for you. High-end estate planning in particular is best approached as a months-long, if not years-long process.

How else can we help you wrap 2021 and position yourself and your wealth for the year ahead? As always, we stand ready to assist!

PLC Wealth Management, LLC (“PLCW”) is a state registered investment adviser located in Raleigh, NC. PLCW is registered in the state of North Carolina and in compliance with the current registration requirements of the states in which PLCW maintains clients. PLCW may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.