Dear Friends and Family,

We have had many personal financial questions recently related to the new tax law and the state of the economy. The cover letter this month will reiterate many of our “truisms” and review some of the new strategies based on the new tax law as well. The tax law is complicated and speaking to your CPA is critical, as we are not and have never pretended to be accountants. Having said that, below are several of the changes we do know about and a few suggestions we would make for your personal finances. Some are new based on the 2018 tax changes and some are our standard financial priorities for your future overall financial health. One key to remember, buying and holding good stocks for the long term is a great investment strategy with the lowest tax implications of any tax strategy we can think of.

• Maximize your pre-tax 401k contributions. This maximum amount changes, sometimes annually, and has an over 50 “catch up” provision so do check with your employer to be sure you are at the maximum or are continually increasing your amount to try to reach it.
• Provide us annually if you like a PDF of your current 401k and your investment options and we can give you advice on selections for investment. We do this on a complimentary basis so that our investments and your 401k investments work in unison for your overall financial health for the long run.
• Maximize your Roth or Traditional IRA contributions in your accounts with us. This is important for you, your spouse, your working children and grandchildren. It is the best way to guarantee your family members will be millionaires when they retire and requires only $5500 or $6500 per person per year depending on your age.
• Bunch charitable donations – when making charitable donations, “bunch” them into one year to take advantage of the larger deduction available. Since the new tax law provides $24k per couple in standard deductions, you may decide to take that instead of itemizing in certain years. You will want to “bunch” the charitable donations for years you do itemize.
• The new gifting amount for 2018 is $15,000
• Financial advisor fees are no longer deductible. Please discuss this with us individually as this is a personalized decision for each client depending on age and tax bracket.
• Capital gains tax brackets have changed. The rate is 15% until you earn more than $479,000 jointly then it increases to 20%.
• Review your credit report and clean up and errors. To improve the number over time, lower the number of credit cards you are using to 2 or 3, and consolidate bank accounts.
• Be sure you have a low rate fixed mortgage and DO NOT PAY IT OFF EARLY. Rates are increasing, and you will appreciate the bank lending you money at such a nice low rate over the long run. Never run a balance on your credit cards.

A couple of additional Fidelity financial notes of importance, the first being a reminder that we updated FCASH to FDRXX, so you are now earning interest on your cash balances in your non-IRA accounts. You were always earning interest in your IRA accounts for your cash balances.

Secondly, we have turned off performance reporting by account at Fidelity. Since we do not manage your portfolio on an account by account basis, but rather as an overall portfolio, this was an inaccurate measure. It also started on a specific date when it was turned on, which for most clients was some time in 2013. This didn’t make a lot of sense, and we have better long-term data in our Morningstar system. In addition, the S&P data they were using was calculated using a different format which made comparisons difficult.

Katz Family Financial