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Category Archives: Investment Advice

Accounting, Investment Advice

Year-end Retirement Planning Strategies

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As we come to the end of 2021, as you are making plans for the Thanksgiving and Christmas holidays, you may want to take some time out and look at your retirement plans, too. No matter what your age, your career advancement, or where you live, it’s not too late to begin, or add to, your retirement plans.  

In fact, this is a good time to assess your progress in planning and see if there are any gaps that need to be filled. So, here are several tips on how you can do retirement planning. You need to be informed. You need to know all the retirement options available to you. Discuss your available retirement planning options through your work. Do some quick web research. Consult your financial advisor and tax advisor.

Not enough? The following are possibilities for your retirement plan: 

    1. Taxable brokerage account: These are accounts funded with after-tax dollars. There are no contribution limits. Just remember that capital gains and investment income are taxable.
    2. Tax-deferred accounts:  These include the following: Traditional, SEP, & SIMPLE IRAs, 401(k)s, and 403(b)s. There are contribution limits depending on the plan. Also, depending on your tax bracket a tax deduction for the year that the contribution was made may be applicable (check with your tax advisor). Don’t forget about the required minimum distributions! The IRS requires withdrawals once you reach the age of 72 if your 70th birthday is July 1, 2019, or later. Roth IRAs do not require minimum distributions.
    3. Medicare: Medicare is a benefit for seniors 65 and older; however, it still has costs to it. Medicare doesn’t cover certain medical expenses like hearing aids, vision care, dental care, and long-term care. It also has large gaps in prescription coverage. In your retirement planning, you may want to budget supplemental medical insurance that goes beyond Medicare. Medicare Advantage and Medigap policies have premium costs and copays that supplement Medicare.
    4. Consider your cash reserves: Cash reserves help ride out stock market down cycles covering expenses while allowing time for investments to hopefully recover from the downturn.
    5. It is truly not too late: Don’t be discouraged! If you are 55 years or older without a retirement plan, it is not too late. Jump on the retirement planning bandwagon. It is possible to do! 

The main point here is that even if you are older and retirement is on the horizon, you can still make smart and logical decisions for your retirement. Consult with your financial advisor and tax advisor to make the changes you need to before the New Year begins.  

 A.K. Burton, PC, can help you do your retirement planning. We have experienced staff who can prepare your retirement accounts. Call us at (301) 365-1974 for a consultation. We serve the Bethesda, Rockville, and Montgomery County, MD area. 

Investment Advice, Tax Advice

What to do if Investment Losses Hurt Your Finances

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“Buy low, sell high.”

It’s a tried and true investment philosophy. Every stockbroker and financial advisor proclaims it.

Unfortunately, investing in the stock market also means losing money-real money. Every honest stockbroker and financial advisor also tells their clients to be prepared for it, no matter what the insiders say or who is in the presidency or congress. Losses happen.

financial losses A. K. Burton, PC

So, how can you handle investment losses? Does it spell financial ruin? Sell it all to recoup your losses? Stop investing entirely and move to Costa Rica?

No, that is desperate and rarely smart. Here are Five Tips to Handle Investment Losses that Could Hurt Your Finances: 

  1. Accept that investment is a risk: Your stockbroker or financial advisor does not control the market. It is completely out of their hands and quite unpredictable. So, accept that any investment you make is a risk. You will win and lose. If you cannot accept that truth, don’t get involved in it as it will only bring disappointment.
  2. Claim your investment loss as a “Realized Loss”: This happens when you sell an investment at a lower price than you paid for it. For instance, you may make $1,000 in capital gains but lose $4,000. You may not pay taxes on the $1,000 but your net loss may be used to offset income and you may be able to claim it this year and future years as a loss. (See your licensed financial or tax advisor for more details.)
  3. Avoid making a “Wash Sale”: If you sell a stock at a loss, only to buy that exact stock back during a 30-day period, it is considered a “wash sale”. If you do that, you may lose the tax benefits of it. Badly-performing stocks you’d like to sell for tax purposes but own again later, you should wait until the wash-sale period ends before buying them back. Bottom line: Cut your losses and move on. Your losses will lower your tax burden and can be carried forward for gains and income in the future.
  4. Investment in Bankrupt Companies: This one is easy-well, sort of. If you invested in a company that has filed for bankruptcy and closed its doors, you can claim a total capital loss on your tax returns. However, the IRS will need documentation from you on why the stock is now considered worthless. So, make sure you have documents on when it became worthless and that it is of zero value.
  5. Be efficient in taking losses: Do your best to document and take your investment losses in the most efficient and ethical way possible. The IRS knows and accepts tax losses as a part of doing business in the fickle world of tax investments. Your tax bracket also is a factor in taking losses. For instance, if you are in the 10% or 15% tax bracket, you are not liable for any losses. The main point here is this: keep accurate documentation of all losses so you and your tax advisor have all the information they need to take advantage of all tax benefits coming to you when your risk goes awry. (Please refer to www.irs.gov)

Investment losses can be painful and heartbreaking. However, it does not mean bankruptcy nor does it mean that you depart the investment world. A smart investment loss strategy that you can develop with your financial and tax advisors makes all the difference and will help in the short- and long-term.

Tax and investment advice is one of the many services we offer our clients at A.K. Burton, PC. (https://cpa-maryland.com/services/accounting-services/) Our experienced and licensed staff can help you, your family and your business make smart tax and investment decisions. Call us at (301) 365-1974 for more information or email us at info@cpa-maryland.co