Market volatility can be quite stressful, especially for those who are near retirement or have recently retired.  By the same token, market declines can create favorable tax planning opportunities, which include the ability to maximize Roth conversions at a discount.  Before deciding to convert a traditional IRA to a Roth IRA, it is important to understand the differences.  Both types of IRAs are designed to help you save for retirement while providing a tax advantage, but they do so in different ways.  With a traditional IRA since contributions are pre-tax, you pay the tax upon withdrawal.  For a Roth IRA, contributions are post-tax, thus future withdrawals are tax-free.  Notably, a key benefit of a Roth IRA is that they do not require taking minimum distributions, unlike a traditional IRA in which required minimum distributions are enforced upon obtaining age 72.    While individuals at any income can complete Roth IRA conversions,...

There’s a myriad of updates coming out of Washington.  Here’s what you need to know to stay up to date so we can plan accordingly.  The U.S. House of Representatives approved House Resolution 2954- commonly referred to as Secure Act 2.0.  The next step for the legislation is for the House and Senate to work together to reconcile the bill, which has strong bipartisan support.  A final passage is expected in the fourth quarter of 2022.  It is important to note that there are items in the bill that could potentially impact taxpayers as early as this year.   Here are the key planning provisions: ·         Expansion of the IRA Qualified Charitable Distributions o   Qualified Charitable Distributions (QCD) can be made from an Individual Retirement Account to a charity and be excluded from income up to $100,000 annually for those over 70 ½.  o   These Qualified Charitable Distributions can count as...

Planning for Success: Have you Considered a Donor Advised Fund to Achieve your Philanthropic Goals? As you contemplate your estate planning and leaving a legacy, you may want to recognize and give to charitable organizations or philanthropic causes that have made an impact on you.  Perhaps, you may want to encourage the beneficiaries of your estate to continue the legacy of charitable giving that you have maintained during your lifetime.  There are several options available to accomplish your charitable giving goals in your estate plan, and a simple and effective solution is with a donor advised fund.     Over the past decade, nonprofit fundraising has been rapidly transformed by new ways to give.  Donor advised funds are a popular way for donors to support nonprofits of all sizes.  Most people believe donor advised funds to be vehicles that streamline charitable giving during their lifetimes.  While this is certainly true, a donor...

It is never too early to learn and develop a strong work ethic.  Simply put, the best way to learn is through firsthand experience.  Family businesses give parents the ability to bestow core business values and acumen to their children.  Whether they are young adults or teens, giving them the experience at a young age on how to properly manage money and invest, will not only jumpstart their desire and ability to be financially sound, but will keep them ahead of the curve.  It also provides them with a way to start saving for future goals like college or a down payment on a house.  In return, you get employees who have a natural sense of commitment, teamwork, and loyalty.  Starting them at a young age will give them a deeper understanding of the business and a greater appreciation for your hard work and dedication to continuing its success.  They may...

Proper Business Protection and Succession Planning  A succession plan is much more than just an idea of who will run the company when you are not able or no longer want to.  A Plethora of factors come into play: Will you sell? To whom? Will your family take over? How will the business continue to operate? What happens to your family, employees, and the company after you pass away or incapacity?   While there is myriad of insurance solutions to protect your business from lawsuits and other liabilities, one liability that simply cannot be avoided is incapacity or death.  This is especially true if you are the sole business owner; without proper planning it will be incredibly difficult to make certain your business and the income it generates to your family will continue to run smoothly.  A comprehensive estate plan will allow you to avoid unnecessary court processes, which could easily cause...

Planning for Success: “Overprotected” - Britney Spears    When Britney Spears burst onto the Billboard Charts at the age of sixteen, she instantly became one the world’s most beloved pop stars.  Despite Britney’s massive fame and fortune, she has never had full control over her own life.  Imagine becoming a worldwide sensation, amassing riches and fortune, but with the caveat of having to ask for permission on how and when it can be used.   As most of us remember, Britney suffered a mental breakdown in 2008, which led to the formation of a conservatorship.  Essentially, a conservatorship is an adult guardianship in which the court appoints representatives to control the individuals legal, financial, and personal decisions.  Initially when established, the conservatorship was meant to be only temporary; yet, in October 2008, it was changed to remain in effect for the foreseeable future.  For the past thirteen years, Britney’s father, Jamie, has...

The benefits of maintaining a long-term perspective.   History is unique, but not different. Although, it can be difficult to watch your portfolio dip with the market, it is important to keep in mind that downturns can be painful but have always been a temporary part of the process.   In the last forty years, we have seen thirteen corrections and eight bear markets in global equities. That is about one every other year. Over the last forty years, global equities have increased by a magnitude of seventeen times. Behavioral finance can be quite comical in the sense that people want more of something when the price increases and less of it when the price declines. We think it should be the exact opposite. Legendary investor Warren Buffett says, "he likes his stocks the way he likes his socks... on sale."    During periods of market volatility, it is important that...

The world has changed in rapid fashion from canceling worldwide sporting events to limiting our travel and gatherings with large scale crowds.  This has caused an obvious disruption in the financial markets and probably will lead to some magnitude of economic downturn or even minor recession.  We say minor because in a large way this will be a self-induced slowdown in order to combat the spreading effects of the virus.  Once the containment sets in, economic activity will start to rebound and we will have more monetary stimulus at our backs to aid in the recovery.  In our earlier letter we projected that governments would step up their efforts to inject confidence either by monetary or fiscal action.  This is exactly what has happened in the United States.  The Federal Reserve added enormous stimulus to the short-term REPO market to ensure credit markets do not freeze up.  Next week the Federal...

It was just two weeks ago the markets were looking at all time highs and consensus was building about an economic recovery continuing based on higher earnings forecasts.  We don’t often experience black swan events but the coronavirus outbreak, by definition, could be possibly considered the black swan event of 2020.  It is early in the outbreak, but markets are seemingly reacting as if some level of economic downturn or recession is on the horizon.  We won’t know for sure what the toll will be on the economy or financial markets until later this year.  We can draw from several historical virus pandemics to get an idea of what happened to economic activity, but every situation and recovery is different.  Here are our quick thoughts on what has transpired so far and what our team at Coral Gables Trust is doing about it.   Government Action   It didn’t take long...

While the holidays were unfolding, Congress was busy signing into law the SECURE Act (Setting Every Community Up for Retirement Enhancement) which has made several important changes concerning defined contribution and defined benefit plans, IRAs and 529 plans.  Most provisions in the law became effective on January 1st, 2020.  Below are some general topics and answers on the main highlights of the new law:   Inherited IRAs Any inherited IRAs that were received prior to 1/1/2020, no changes are required to the current distribution schedules in place.  Going forward, however, fewer beneficiaries will be able to extend distributions over their lifetime (a.k.a “the Stretch IRA”).  In most situations there will now be a requirement that all assets must be withdrawn from the inherited IRA within 10 years.  Some of the exceptions to this rule include surviving spouses, minor child, a disabled or chronically ill individual and beneficiaries who are no more...

What a difference 60 days makes.  It wasn’t that long ago when the tariff fight was in full force dominating the daily headlines resulting in directionless markets.  With really no hope for a deal, recession fears were starting to build based on a slowing global growth picture.  Investors were pouring into bonds like they were going out of style and the low volatility/defensive portions of the equity markets were investors preferred hiding place. Granted, things are still not resolved, but there is a little more clarity today than yesterday causing a change in sentiment.  We are a few weeks away from seeing a “phase 1” completion of the trade deal which has been all the news the market needed in order to reignite animal spirits early in the fourth quarter.   As we write, the S&P 500 has hit a new intraday high. On top of the tariff fight de-escalation, the Federal...

Q3 2019 - Will FED Cuts be Enough to Fight the Global Cold?    Commentary by the Trust Investment Committee    Despite the yield curve frenzy, escalating trade tensions and Washington rhetoric the third quarter came and went without much to be disappointed about. The major U.S. indices remain resilient and are only a couple percent from record highs set in July. The S&P 500 returned +1.68% for the quarter and is higher by +20.55% YTD, however, we have to be mindful that the S&P 500 is essentially flat year over year when factoring in the fourth quarter of 2018. The technology heavy NASDAQ enjoyed a quarterly gain of +0.17% and is higher by +21.46% YTD. On the economic front, employment data released for the quarter was good enough to keep the unemployment rate below 4% and wage growth at reasonable levels, however, the job market is showing early signs of...

Market Insight by Mason Williams   The Federal Reserve cuts interest rates again by 0.25%   The Federal Reserve finds itself in a no-win situation.  Criticism is running heavy in both directions. The market bulls and Trump administration want faster rate cuts to get ahead of a slowing global economy while a large wave of market participants wonder why we are cutting rates at all given the positive economic backdrop.  In either case, Federal Reserve Chairman Jerome Powell continues to march forward with a “data dependent” outlook on policy.  The Federal Reserve cut its target rate last week, as expected, by 0.25% to a range of 1.75% to 2.00%.  This was the second rate cut of 2019.     Future rate cuts are uncertain at best.  At this point in the cycle, should the Federal Reserve be cutting rates? Certainly, some of the Federal Reserve Committee members don’t believe so.  It...

Small business owners are actively involved in all aspects of the business, from day-to-day operations to continuing the sustainability and the growth of the business. At what point are you casting your net too wide?     It is not uncommon for business owners to assume they will never retire. After all, you’re doing what you love, so why not continue indefinitely? According to a Manta survey, a third of small business owners and entrepreneurs do not have a retirement strategy in place. Some entrepreneurs believe that selling their business is an effective way to fund their retirement. Attempting an exit strategy without a well-developed succession plan is not a feasible option. Small business owners must plan for themselves because if they don’t, who will? Before we begin reviewing the different retirement plan options, we need to determine the objective that we would like the retirement plan to achieve. Are we trying...

With the cost of college education skyrocketing and outpacing wage growth by nearly eight times, it is not surprising that student loans make up the largest portion of the U.S. non-housing debt. According to College Board, the average cost of tuition and fees for the 2018-2019 academic year for an in-state student at a four-year public university has increased 2.8 percent from the prior year to $21,370. A four-year private university increased 3.2 percent  from the previous year to $48,510. What techniques and strategies could be utilized to reduce the burden of potential student debt and keep it from snowballing? How can we best optimize our cash flow to fund all our goals and not become overwhelmed by the escalating cost of education? The One-Third Model is a funding strategy to help us stay on track with education planning by dividing the cost of college into three parts.     •...

Here you are — 20-something, just graduated and accepted your first “real” job. Your employer mentions the company’s competitive 401(k) plan and you already mentally write it off. With credit card bills, student loan debt, rising rents and low starting salaries, it seems obvious that saving or investing is the last thing on your mind. Multiple studies have shown that millennials/Gen Zs are “dramatically worse off financially” than older generations were at their age. According to a recent study released by Deloitte, comparing 2007 to 2017, millennials are spending 16 percent more on housing, 26 percent more on food costs, 21 percent more on healthcare costs, and 65 percent more on education. The struggle is real, but does that mean financial independence is unobtainable for our generation? Although the statistics may be true, millennials need to understand that what they have is TIME on their side. Investing is not just for...

We’ve all heard of the “millionaire next door,” the investor who quietly amasses a fortune by living within his or her means, buying the right securities, and faithfully staying the course through various stock- and bond-market cycles. Perhaps we even know a few such people.   This sort of person typically eschews the services of a financial planner, reasoning that his or her own strategy has worked so far, and that the financial planner’s fee is an unnecessary expense. But financial planning by an objective professional — one who has no proprietary products to sell —is an investment that will pay for itself many times over, just like a good security.   An adviser will take many things into account when advising a client, including the time horizon (age of the family), its short- and long-term financial goals, and the timing and nature both of cash inflows and outflows.   The...

Last summer, Fidelity Investments became the first financial company to offer no-fee index mutual funds, and quickly attracted about $1 billion into two portfolios. This has several implications for wealth management companies, and for investors.   The funds the company is offering — one each focusing on U.S. and international stocks — are passive funds; they are built to mirror a market index. Active strategies, on the other hand, comprise stocks chosen by an advisor and their team of analysts.   Passive funds are a lot cheaper than active funds, and over the past five years, they’ve had a stronger growth rate, partially because the fees are lower. They are the go-to product for millennials who have just begun investing. The thinking goes: ‘When the market is as strong as it is, why would I pay someone more to choose stocks for me?’ This product is starting to creep into the...

Advice on amassing sufficient assets and investing them well to build a healthy retirement is easy to find. Books, online resources, lectures, magazine articles, a talk with your financial advisor — even blogs like this — can be invaluable tools for the investor just starting out and those who want to proactively manage their financial futures.   But what about that day, six months after your 70th birthday, when you’re facing the prospect of taking annual required minimum distributions from your IRA or 401(k)? The Internal Revenue Service demands that you withdraw a percentage of your tax-sheltered funds — the amount will vary depending on myriad factors including the type of plan you have, your life expectancy, and the age of your spouse, and other considerations — and pay taxes on those withdrawals.   Guidance at that juncture is somewhat harder to find, but here are some factors we at Coral...

A constant dilemma in the world of wealth management is whether it’s wise to stick with the security of U.S. stocks or venture into the international marketplace in search of potential opportunities. This seems especially relevant now, when tough talk on tariffs threatens to roil the seas of international trade and usher in unintended consequences. We at Coral Gables Trust Company have always preached that diversifying one’s portfolio — both geographically, between companies, and across investment vehicles — is the wisest move and the surest path to achieving your goals. But when, how much, and where to diversify? The following are some things to consider. The international space has been hard over the past three or four years. We in the U.S. got our act together quickly after the 2008 financial crisis. We jumped into recovery mode right away, whereas the international markets were not as swift to respond. There is...