The Art of Letting Go

Investors, besieged with financial news, reports, and information daily, may be inclined to constantly tinker or make adjustments to their portfolio.  By following the advice from a recent article or a talking head, they can be susceptible to the latest fad or market predictions and may get caught up in the excitement of chasing what are all too often allusive returns.  In his piece “The Art of Letting Go,” Dimensional Fund Vice President, Jim Parker suggests that investors might be better served by following the Chinese Taoism tenant of “wuwei,” or, “non-doing” than micro managing their portfolio. Find this month's article below. 

Who Has the Midas Touch?

From time to time we are asked to offer our opinion as to whether or not gold should be a part of one’s portfolio.  While interest in gold seems to ebb and flow as economic reports and political events unfold, general interest seems to persist.  As such, we thought Dimensional Funds VP Weston Wellington’s recent article exploring the merits of holding gold as an investment is instructive.  Throughout the article Weston cites the thoughtful opinions of Warren Buffett.  His comment that “where gold advocates see a safe harbor, Buffet sees just a different set of rocks to crash into” offers insight into his question of Who has the Midas Touch?    Find this month’s article below.

Investors Flee Stocks at Precisely the Wrong Time

As we approach mid-year 2013, rampant pessimism as measured by consumer sentiment has recently dipped to its lowest level in over 30 years.  This degree of pessimism is so pervasive that some would suggest that “America’s best days are behind her.”  As an investor, how worried should you be?  Maybe not as worried as so many others seem to be as suggested in this month’s article entitled Investors Flee Stocks At Precisely The Wrong Time. The article points out that historically, consumer sentiment and stock market performance are often at odds.  Read more of this month’s insightful article by following the link below. 

http://portadvisors.com/featured-news

Warm Regards,

The Portfolio Advisors Team

It’s Not Too Late to Reduce Your 2012 Tax Liability!

There is still time to reduce your 2012 tax liability by making an IRA contribution before the filing deadline of April 15, 2013 (but please don’t wait until the last minute).  You may be able to contribute up to $5,000 for 2012.  If you are over age 50, you may be able to contribute up to $6,000*.  If you are married and both over age 50, you could save up to $3,360 combined in Federal Income Tax for 2012 (28% tax bracket) provided that both of you have contributed up to the $6,000 threshold.  Not only would your tax burden be reduced by $3,360, your $12,000 combined IRA contributions would continue to grow tax deferred until withdrawal at retirement age.

Another option to consider is a Roth IRA contribution up to the same $5,000 limit.  Similarly, those over 50 can contribute up to $6,000**.  There is no immediate tax benefit to the Roth IRA as after tax dollars are used to fund this retirement vehicle.  However, the benefit is that the Roth IRA is allowed to grow free of Federal and State tax.  Unlike the traditional IRA, there is no tax due when you begin to take money out at retirement age***.  Because Roth withdrawals at retirement are not taxable, they can provide the additional benefit of tax bracket management.  Simply put, money taken from a Roth IRA at retirement might allow one to control in which tax bracket they fall.  Roth IRAs can be a consideration for those who will be in the same or higher tax bracket upon retirement. 

If you have already maximized your 2012 IRA (and Roth IRA) contributions, 2013 contributions can be made with new increased limits.  The contribution limits for 2013 are $5,500.  If you are over age 50, the new limit is $6,500 per person.  To help facilitate 2013 contributions, you may wish to consider setting up monthly automatic checking deductions.  Please let us know if you would like to consider this option. 

Please contact us as soon as possible if you would like to make a 2012 IRA contribution or if you have any questions related to IRA contributions.

The Portfolio Advisors Team

*If you are covered by a company retirement plan, the phase out range for IRA deductibility is $92,000-$112,000 (married filing jointly).  If you are not covered by a company plan but your spouse is covered, the phase out range is $178,000-$188,000. 

**Roth IRA phase-out limits for a married couple is $173,000-$183,000.

***Roth earnings are subject to Federal and State taxes as well as penalties if taken before age 59 ½. 

2012: The Year It Didn't Happen

As we enter the new-year, it may be worthwhile to reflect on 2012.  Please see the article below written by Weston Wellington, Vice President with Dimensional Fund Advisors, entitled “2012:  The Year It Didn’t Happen.”  The article reminds us that, as is so often the case, earning the rewards offered by the world’s capital markets requires a combination of discipline and detachment from the ominous headlines that we are bombarded with daily.  I hope that you find the article worthwhile.  

We at Portfolio Advisors wish you the very best that 2013 can offer, and we remain here to serve you.   

Warm Regards

The Portfolio Advisors Team 

Important Year-End Information

If you have not already received your 1099 Composite and Year-End Summary for your respective accounts for 2012, it should arrive from Charles Schwab no later than the end of February.  Should you have any questions regarding your Portfolio Report or your 1099 statement, please do not hesitate to call us. We also request that once you have completed your 2012 tax return that you provide us with a copy so that we may better advise you.

Warm Regards, 

The Portfolio Advisors Team 

Here’s a Map to Basic Fundamental Financial Planning

We just came across a great Financial Planning Flowchart that was published in the December 20 issue of Business Week.  It was put together by the Business Week team of Nick Summers and Karen Wise with input from Milo Benningfield, a San Francisco-based financial planner; Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards; Tim Steffen, Director of Financial Planning and Wealth Management at Robert W. Baird; Maria Bruno a senior investment analyst at Vanguard Group and Meir Statman, finance professor at Santa Clara University.

The chart does a nice job of mapping out basic financial planning tenets and touches on debt management, retirement planning and insurance needs.   We thought you might find it worthwhile in your planning for 2013 and perhaps even a little fun.  

Please check it out at the link below:

http://www.businessweek.com/articles/2012-12-20/the-financial-planning-flowchart