• Skip to main content
  • Skip to primary sidebar
  • Skip to footer
MENUMENU
  • Home
  • About Us
    • Our Philosophy
    • Choosing a Financial Planner
    • Legal and Regulatory
    • Team
    • Careers
    • Awards & Recognition
    • Contact Us
  • Our Services
    • Financial Planning
    • Ongoing Financial Guidance
    • Portfolio Management
  • Financial Planning Basics
    • Continuing Care Retirement Communities (CCRCs)
    • Retirement Planning and Cash Flow
    • Social Security
    • Taxes
    • Insurance & Risk Management
    • Investments
    • 401(k)
    • Real Estate
    • College
    • Liquidity
    • Divorce
    • Estate Planning
    • Sensible Updates
  • Resources
    • Blog
    • Financial Planning for Older Adults
    • Webinars
    • Videos
    • Financial Planning Guidebook
    • Continuing Care Retirement Communities Guidebook
    • Primers
    • Financial Planning Links
    • Client Login
  • Contact Us
Sensible Financial Planning

Sensible Financial Planning

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
Client Login

Call Us Today
781-642-0890

Sensible Financial Tips (part 3)

by
Marie St. Clare
CFP® - Financial Advisor

June 7, 2022

The picture is of pastry decorating tips. They represent financial tips, loosely.

This year marks Sensible Financial’s 20th anniversary. We put our heads together and came up with financial tips to share. Because of the volume of clever ideas, I divided the material into three articles. The tips fall into 8 categories: saving, retirement, charitable giving, investing, debt management, insurance, estate planning, and security. In the first, I covered saving and debt management. The second article was full of financial tips related to retirement, estate planning, insurance, and security. This one deals with investing and charitable giving.

Investing

  • Buy I Bonds as inflation-protected savings.
    —Rick Miller, Founder and CEO
    • iBond interest rates adjust every 6 months to match inflation. From November of last year through April of this year, interest rates were over 7%!
    • Go to Treasurydirect.gov to open an account. Link the account to the bank account you will use as a fund source.
    • Use money that you don’t need right away – you must leave the funds invested for at least a year. Also, withdrawals before 5 years incur a 3-month interest penalty.
  • Don’t hold employer stock (in your 401(k) or almost anywhere else).
    —Rick Miller, Founder and CEO
    • Holding stock in your employer is the opposite of diversifying. First, it’s an individual stock, not a mutual fund. Second, your income and employment prospects correlate highly to your employer’s stock performance. When the company does well, the stock will go up, and you’ll likely get a raise. If it doesn’t, the stock will go down, and you might lose your job.
    • If your employer contributes shares to your 401(k) convert them to a diversified investment as soon as you can. Do you receive employer stock as compensation? Sell it as soon as possible.
    • You may use an ESPP (Employee Stock Purchase Plan) to get a discount on your company’s stock, but don’t hold the stock any longer than you must.
  • Academic research supports the idea that investing in passively managed funds will likely provide greater long-term investment returns than actively managed funds.
    —Edward Samp, Trader and Associate Portfolio Manager
    • It is extremely difficult to consistently identify underpriced stocks. The efficient market hypothesis states that security prices reflect all available information. Consistently outperforming the market is very hard.
    • Invest in low-cost index mutual funds and Exchange Traded Funds (ETs).
    • Index mutual funds and ETFs tend to be tax efficient. ETFs have a slight edge.
  • Tax-loss harvesting can (1) offset short term and/or long-term capital gains and (2) potentially reduce taxable income.
    —Edward Samp, Trader and Associate Portfolio Manager
    • Long-term capital gains (gains from sale proceeds of securities held for one year or longer) are taxed at 0%, 15% or 20% at the federal level. Short-term capital gains (gains from sale proceeds of securities held less than one year) are treated as ordinary income. Harvesting short-term and long-term losses can offset portfolio income. If the net of short-term and long-term losses is negative, it can offset up to $3k of ordinary income per year, and any additional amount can be carried forward to future years. State short-term and long-term gains taxes vary between state.
    • You can sell securities in your portfolio with losses and replace them with a very similar security. (The IRS does not allow you to replace the security with one that tracks the same benchmark and has the same underlying holdings and claim a loss for tax purposes).  After holding this new security for 30 days, you can decide whether to swap back into the original security. (If there were now a gain in the new security, you may decide to continue holding it.)
    • The end of the year is a good time to consider tax-loss harvesting in your portfolio.

Charitable Giving

  • If you are 70½ or older, a Qualified Charitable Distribution (QCD) is a tax efficient way to donate to charity.
    —Aimée Plouffe, Associate Financial Advisor
    • A QCD is a direct transfer of funds from your IRA to a qualified charity. QCDs count towards your annual required minimum distributions (RMDs) and are excluded from taxable income. In other words, while you would ordinarily pay tax on pre-tax IRA withdrawals, distributions that are sent directly to charity are not taxed!
    • To make a QCD, contact your IRA’s custodian (where your IRA is held) to request a QCD. Specify the dollar amount and request that the check be made payable to the charity of your choice. Ask the charity to mail the check to you. Then, forward it to the charity and request a receipt for your records. The custodian will not issue a supporting document.
    • QCDs cannot be made to certain charities such as private charities and Donor-Advised Funds.
  • Consider using a Donor Advised Fund to “bunch” your charitable donations if you are taking the standard deduction.
    —Marie St. Clare, Associate Financial Advisor
    • If you are taking the standard deduction, your donations are likely not reducing your tax bill. Contributing multiple years’ worth of gifts to your Donor Advised Fund in one year may allow you to itemize and receive a tax benefit.
    • You can open a Donor Advised Fund at Fidelity, Schwab, or Vanguard among others. If you work with an advisor, contact them for help opening an account.
    • Donating appreciated securities instead of cash to your Donor Advised Fund provides an additional tax benefit – you avoid paying tax on any embedded gains. Please ask your advisor about other important considerations specific to your personal situation.

The more information you have, the better the decisions you make. If you have questions about these financial tips, please contact your financial advisor.

Photo credit:

“Pastry Bag Tips” by Veganbaking.net is licensed under CC BY-SA 2.0.Copy text

More articles by Marie St. Clare Filed Under: Financial Planning Basics Tagged With: Charitable Giving, financial tips, Investment Strategy

Primary Sidebar

Sign up for our newsletter

Recent Posts

The picture shows a college campus and students because the article is about FAFSA.

The FAFSA Simplification Act and Financial Aid

The FAFSA Simplification Act makes adjustments to the FAFSA. How will it affect your college student and their financial aid?

The picture shows an older couple hiking on a beautiful day to represent retirement and the SECURE Act.

The SECURE Act 2.0 and Retirement

The SECURE Act 2.0 builds on the initial SECURE Act of 2019, changing the retirement planning space, and increasing retirement flexibility.

Categories

  • College Planning
  • Cybersecurity
  • Estate Planning
  • Financial Planning Basics
  • Financial Planning Videos
  • Insurance & Risk Management
  • Investments
  • Retirement Planning and Cash Flow
  • Sensible Updates

Topics

401(k) Annuities bond returns Bonds Charitable Giving College Planning Company Updates Credit Health Disability Insurance diversification Divorce Donor Advised Funds Economy estate planning Federal Reserve Financial Goals Financial IQ financial planning Financial Strategy Forbes.com housing inflation Investments Investment Strategy IRA Legislation Liquidity Long-Term Care Medicare Mortgage Older Adult Living Recommended Books remote work Retirement Choices retirement planning Retirement Savings Risk Management Securities Social Security Social Security benefits Staff News Stock Market Stocks sustainable portfolios taxes

authors

Rick Miller
Sensible Staff
Frank Napolitano
Rick Fine
Josh Trubow
Chris Andrysiak
Marie St. Clare
Laura Williams
Gyb Spilsbury
Chuck Luce
Aimee Plouffe Polley

Footer

Services

  • Financial Planning
  • Financial Guidance
  • Portfolio Management

About Us

  • Our Philosophy
  • Team

Resources

  • Blog
  • Financial Planning Guidebook
Sign up for our Newsletter
Awards & Recognition

Follow Us

  • Facebook
  • LinkedIn
  • Twitter

Locations

Massachusetts

203 Crescent Street, Suite 404

Waltham, MA 02453

Phone: (781) 642-0890
Fax: (781) 810-4830

 

California

600 B Street, Suite 300

San Diego, CA 92101

Phone: (619) 573-4131​

Disclaimer

This content reflects the opinions of Sensible Financial®. We may change it at any time without notice. We provide this content for informational purposes only. Although we endeavor to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. We do not intend the information contained in this website as investment advice and we do not recommend that you buy or sell any security. We do not guarantee that our statements, opinions or forecasts will prove to be correct. Past performance does not guarantee future results. You cannot invest directly in any index. If you attempt to mimic the performance of an index, you will incur fees and expenses which will reduce returns. All investing involves risk. You can lose any money you invest. There is no guarantee that any investment plan or strategy will succeed.

More important additional information and full disclaimer.

Copyright © 2023 Sensible Financial · All Rights Are Reserved
Legal Disclosure