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End of the Year Financial Tips and Tax Strategies


When it comes to the end of the year, it seems like everyone is in a rush to finish their shopping, decorating and preparing for house guests. But in addition to all of the seasonal things going on right now, the end of the year and beginning of a new one is the perfect time to reflect upon your past financial year and review your portfolio.

Have you been able to save as much as you wanted? How is your debt picture looking? Are you expecting to owe a large tax bill at the beginning of the year? Have you had any major life changes this year that may affect your financial picture? Did you start a business this year? If any of these questions made you think a little harder, we urge you to give us a call and schedule a client meeting to go over everything together.

But in the meantime, we wanted to share a few financial and tax tips that can be beneficial for everyone this time of year.

1.      Think outside the gift box: Consider giving your favorite non-profit appreciated stocks or mutual funds this year. The benefit of doing this is that the non-profit receives the full value of the stock or mutual fund without you having to sell it and pay the capital gains tax. Additionally, you receive a tax deduction for the full appreciated value of the stock or mutual fund. If you're doing any end-of-year purging, it is also wise to donate unwanted items to non-profits such as the Salvation Army or Goodwill and use it as a tax deduction.

2.       Another gift idea that benefits you as well as the receiver is cash gifting to your children: The IRS lets you gift $14,000 per person per child without having to file a gift tax return.  If you are trying to help out a child who’s saving to buy a home, this is a great idea.

3.       Contribute the maximum amount to your retirement accounts: If you have not already done so, max out your 401(k) or 403(b) with your last paycheck to maximize the tax incentives.

4.       Use your flexible spending account if you have one: If you are enrolled in a flexible spending account and you don’t use it by December 31st, you will lose the money in the account—it cannot be rolled over to 2016.

5.       Fund your child’s Section 529 College Savings Program:  Many states, including Maryland, Virginia and the District of Columbia allow for tax deductions from state income tax if the contribution is postmarked by December 31st.

6.       Roth IRA Conversion:  If you think your income tax rate in retirement will be much less than your tax rate today, it may make sense to do a Roth Conversion before the end of the year.  You will generally be paying higher tax rates now for the benefit of an account which will grow tax-free in the future. Remember that this works best when you are able to pay taxes on the conversion with funds outside the IRA.   

7.       If you’re getting a big refund, you might want to adjust your withholdings:  This is done by submitting a new W-4 Form to your employer.  Remember, the government doesn’t pay you any interest for lending them extra money throughout the year.

If you have any questions or concerns about any of this, please give us a call at 301-258-1300 to schedule a meeting. Happy Holidays! 


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WSJ: How to Become a Financially Compatible Couple

WSJ: How to Become a Financially Compatible Couple

With Valentine's Day around the corner, we thought it would be appropriate to touch on one of the toughest topics affecting relationships today - money. 

A Wall Street Journal article published today and written by Manisha Thakor titled "How to Become a Financially Compatible Couple" provides some great insight into the problems couples face when merging their finances. She says that, "Study after study shows money right up there with general incompatibility and infidelity as top marriage busters." Ouch! 

Here at Ivy League, we specialize in providing fee-only financial planning and investment management for couples, and we make sure that each party is educated as to their financial situation. 

Read the full article below or click through to WSJ to read it on their site. 

Contact us today to set up an initial consultation to learn more about financial planning for couples, investment management for couples, or for general financial planning concerns. Happy Valentine's Day!


MANISHA THAKOR: When it comes to getting married, we have no statutory requirement or social convention that couples be required address an issue which, if left unexplored, can do deep and permanent damage to the well-being of a relationship.

And make no mistake, money damages marriages on quite a regular basis. Study after study shows money right up there with general incompatibility and infidelity as top marriage busters.

To add insult to injury, academic research has demonstrated that we are biologically hardwired to be romantically attracted to our financial opposites. It turns out there is something intoxicating about “financial otherness” in the early stages of a relationship. In other words, we tend to be attracted to the very type of person most likely to stress us out financially down the road.

So now fast-forward a bit. Many people are married in ceremonies during which they pledge to support each other “for richer or for poorer.” But in the absence of clarity about how your household will handle money during what is hopefully a fulfilling and life-long union, it’s easy for those words to become meaningless.

But what if, as a part of obtaining a marriage license, couples were given the option to watch an online financial-education video in the privacy of their own homes? This video could walk them through some of the key financial topics that come up in a marriage and couples need to discuss honestly with each other. Not only could this exercise heighten general financial awareness, but it could go a long way toward bringing couples even closer together by removing the tension that inevitably permeates a relationship when such a vital topic goes under-discussed.

Examples of the discussion points I’d love to see presented in this kind of video include:

  • Where are we starting from?
    • What assets, liabilities, income and existing ongoing expenses are each of us bringing into this marriage? If we have large debts (student loans, credit cards, business-related) what is the plan to pay them off? What investment accounts do we have and how are they invested?
    • What are each of our credits scores? If either of us have blemishes on our credit, what caused them and what changes have been made to prevent such occurrences in the future?
    • What are the non-negotiable financial commitments in each of our lives?
  • Where do we want to go?
    • Housing: Rent or own? How much, and in what part of the country?
    • Children: Do we want them, and if so, how many? Are we ready for any necessary financial trade-offs?
    • Education: Public or private? Who will pay for what?
    • Travel and fun: What kinds of activities and what kind of budget?
    • Philanthropic giving: What causes and in what amounts?
  • What are the action steps to get us from here to there?
    • If we merge all finances, do we want to set a dollar limit above which we agree to consult each other before spending? Or do we set an amount we allow each other to spend monthly, no questions asked?
    • Do we need to increase income or rein in spending to reach savings goals?
    • Do we need to dial up or dial down the risk in our investment portfolios? Are we seeking guidance from a fiduciary adviser who must legally put our interests first?
    • How often, and in what way (on our own or with an adviser’s help), do we want to periodically revisit these questions?

The intention of this list, which is not exhaustive, is simply to demonstrate the range of topics that, when properly addressed, can help a couple launch their marriage from a more intimate place financially. Including this discussion as one of the many steps that go into the joy-filled process of planning a wedding would position many more couples to effectively solve the kind of financial problems that all too commonly destroy a marriage.

Manisha Thakor (@ManishaThakor) is director of wealth strategies for women at Buckingham and The BAM Alliance, a community of independent registered investment advisers.


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Staying the Course Amidst the Market's Volatility

Staying the Course Amidst the Market's Volatility

Many of you are familiar with Jack Bogle, founder of Vanguard. Bogle was a pioneer in the investment community, being the driving force behind low-cost index fund products.  Even well into his 80’s he is revered for his perspective on the market and the investment environment in general. 

 Bogle was interviewed on CNBC on Tuesday, December 16th and his main message was the following:

  • Get used to the market's volatility
  • Have a plan to stay the course 
  • Use asset allocation to help you meet your financial objectives

We have been practicing this form of long term investing ever since our inception in 1999, and are continually reminding our clients that staying in the market for the long term with an appropriate asset allocation strategy is the most prudent investment strategy. While we don’t agree with all of Bogle’s points, such as not investing directly overseas (where the markets are much less expensive than the U.S.), his voice adds a sensible viewpoint amidst the recent market volatility.

To watch the interview in its entirety, please click here. As always, if you have any questions about long term investing, market volatility or anything else investment management related, please don’t hesitate to contact us to schedule a complimentary consultation. 

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14 Top Year-End Tax Moves For Individuals In 2014

Although 2014 is coming to a close over the next several weeks, there is still time to make moves to save on your 2014 taxes. This article originally appeared here on our Featured News page, but we thought the information was so good it deserved a prominent spot on our blog as well. Remember that even making one of the 14 moves below could potentially save you thousands of dollars on your 2014 taxes! 


'Tis the season for year-end tax planning. By making tax moves, particularly those that relate to your investments, as the year winds down, you can pile up tax savings. Here are 14 strategies that may result in holiday cheer: 

1. Harvest capital gains. Despite recent tax rate increases, you still can benefit from favorable tax rates if you sell securities at year-end. For instance, the maximum tax rate for long-term capital gains remains 15% for most investors in 2014. It's 20% for those in the top ordinary income tax bracket--still pretty good.

2. Harvest capital losses. If you've already realized gains this year--especially short-term gains taxed at ordinary income rates--you could unload something now at a loss. Your losses can offset the capital gains, plus up to $3,000 of ordinary income in 2014.

3. Maximize the 0% rate. If you expect this year to be a low-income year (for example, if you have a large business loss), a portion of your long-term capital gains may qualify for the 0% tax rate that applies to income in the two lowest ordinary income tax brackets. Try to make sure that you and other family members cash in on this benefit when you can.

4. Buy into dividend-paying stocks. Most stock dividends are taxed at the same preferential tax rates as long-term capital gains under the same basic tax rate structure. To qualify for this tax break, you must hold the stocks paying the dividends for at least 61 days.

5. Minimize NII tax. A 3.8% tax applies to the lesser of your net investment income (NII), which includes capital gains and dividends, or your modified adjusted gross income (MAGI) above $200,000 for single filers and $250,000 for joint filers. (If your income falls below those thresholds, you won't owe NII tax.) You can reduce exposure to this tax by lowering your NII and MAGI for 2014 (for example, by investing in tax-free municipal bonds).

6. Sidestep the wash sale rule. If you buy "substantially identical" shares within 30 days of selling securities at a loss, you can't deduct the loss on your tax return. Avoid this "wash sale" rule by waiting at least 31 days to buy back the same shares or buy the new stock first and then wait at least 31 days to sell the original shares.

7. Arrange an installment sale. Generally, you can defer tax on the sale of real estate or other property if you receive payments over two years or longer. Not only do you stretch out your tax payments over time, you might pay a lower tax rate for capital gains than if selling the property pushed you into the top tax rate.

8. Boost 401(k) contributions. Try to increase your tax-deferred contributions to a 401(k) plan at work. For 2014, you can elect to defer up to $17,500 to your account ($23,000 if age 50 or over). Besides trimming your current tax bill, it helps build savings for the future.

9. Convert to a Roth. If you have funds in a traditional IRA, you may move some or all of those funds to a Roth IRA, paying income tax now on the converted amount so that most future Roth distributions will be tax-free. If you spread the taxable conversions over several years, you'll reduce the tax bite.

10. Rent out a vacation home. You can write off specified rental activity costs, plus depreciation, but be careful. If your use exceeds the greater of 14 days, or 10% of the days the home is rented out, deductions can't exceed the amount of rental income you receive. Keep an eye on personal use as the year draws to a close.

11. Dust off charitable donations. Instead of tossing out old furniture and clothing, give items in good condition to charity. Generally, you can deduct the fair market value of property donated to a qualified charitable organization, within certain limits.

12. Take RMDs in time. You normally must take required minimum distributions (RMDs) from qualified retirement plans and IRAs each year after age 70½. If you don't, you'll pay a penalty equal to 50% of the required payout. To avoid problems, arrange for RMDs well before January 1.

13. Find a PIG. Under the passive activity rules, you can deduct losses from passive activities, including most investing, only against income from other passive activities. (Special rules apply to real estate.) Investing in a passive income generator (PIG), a special investment that produces passive income, could help increase this year's deductions.

14. Be generous to your family. Finally, under the annual gift tax exclusion, you can give up to $14,000 to anyone you choose in 2014 without paying gift tax. This reduces your taxable estate and generally results in overall income tax savings for the family. Happy holidays!

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How the Balance of Power Affects Wall Street

How the Balance of Power Affects Wall Street

Graphic From USA Today November 4, 2014

Now that the midterm elections are safely behind us, a lot of people are wondering how politics will impact their investment returns.  The conventional wisdom is that divided government--where one party holds the White House while the other controls the House, the Senate or both--is good for the markets.  But is that true?

The truth is, there is no magic formula.  The specific circumstances of each era, and the actions taken by each President and Congress, are much too individual and different for us to generalize.  But the statistics are interesting nonetheless.  Perhaps most interesting of all, the markets seem to like midterm elections regardless of who wins.  The S&P 500 has gained in every six-month period following the last 16 midterm elections, with a remarkable average return of 16%.  Going back a little further, from 1922 to 2006, the Dow Jones Industrial Average has jumped 8.5% in the 90 trading days following the midterms, versus just 3.6% in non-midterm-election years.

If you look at divided government vs. times when one party controlled both the White House and Congress, the results are a bit harder to interpret.  The average annual total return for the S&P 500 when Washington is a one-party town has been 9.4%, compared with 10.6% when the parties were checking and balancing each other.  However, another study going back to 1900 found that during times of total unity (67 of the 111 years analyzed), the Dow gained 7.6% a year.  When Washington is locked in partial gridlock, in other words, where one party controlled Congress and the other the White House, (32 years in all), the index gained 6.8%.  And during the 12 years of a gridlocked Congress, the S&P gained just 2% per year.

Since 1945, the pattern holds. Under total unity, stocks climbed at a 10.7% annual pace. Under partial gridlock, they gained 7.6% per year. And under total gridlock, which accounts for eight of the 65 years, they gained just 3.5% per year.

This gloomy news might be offset by another trend, however.  Since 1900, the third year of a US presidency has been easily the best year for markets, with investors enjoying median annual gains of 16.5%.

There’s one other statistic to note, which might trump them all.  It appears that the Standard & Poor's 500 Index performs two or three times better when Congress is out of session than when at least one of the two chambers is at work.  A famous quote from an 1866 New York court decision, that “No one’s life, liberty or property are safe while the legislature is in session,” would seem to have some truth for the equity markets.  

This article was written by financial expert Bob Veres, and reprinted here with his permission.




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