Tax Planning

Lucia Capital Group Weekly

The 4 Steps of Retirement Income

February 27, 2020

Financial planning is our business; it’s what we do every single day. And since no two people have the exact same goals, risk tolerances, investments, and income needs, every single plan we put together is different. Much of the planning process boils down to this: How do we create enough retirement income for you to live the way you want to live, without having to worry about how long your money will last? Some people have all the income they’ll ever need, and more. Others require some extra careful planning to meet their goals. But while the details of each plan may be vastly different, there are some common basic steps that we use to formulate each one.

Lucia Capital Group Weekly

3 Questions Every Confident Investor Should Ask

February 21, 2020

The current bull market for stocks began on March 9, 2009. But the belief among some investors at that time was that stocks still had farther to fall, and the worst was still to come. They were wrong. Now, nearly 11 years later, we still have not seen another bear market in the S&P 500. This situation has created in the minds of some investors that stocks will continue to climb forever – a mistaken idea that could have dangerous consequences. When markets are flying high (or, conversely, when they’re sinking into oblivion), it can create a recency-bias mentality that may cause you to stray from your stated investing objectives. You may be tempted to make a risky move in response that you’ll later wish you hadn’t: a move that may be irreversible. Before you make a move like that, either out of fear or elation, you should ask yourself three important questions.

Lucia Capital Group Weekly

Can You Control the Uncontrollable and Forget the Rest?

February 13, 2020

In last week’s video, we explained why it’s often better to manage the amount of risk you take in your portfolio, rather than trying to achieve a high rate of return.  We showed how two sets of hypothetical portfolios, both with the exact same investments over a 10-year period of time, could have entirely different outcomes — simply by changing the date that a retiree began taking withdrawals. In this week’s edition of Lucia Capital Group Weekly, our “Professor” Rick Plum takes that same hypothetical scenario and expands the time horizon by another ten years.  How did these two (imaginary) identical portfolios fare after a 20-year time horizon? You may be surprised.  

Lucia Capital Group Weekly

Manage Risk, Not Return

February 6, 2020

When it comes to investing, people often make the mistake of focusing on the wrong goal. Certainly, most everyone would like to see a good rate of return on their investments, and it’s nice when that happens, but trying to manage your way into achieving a high rate of return is almost always a fool’s game. Day trading, chasing yield, acting on short-term market predictions, and other gambits are not only time-consuming, but also time wasting. There is simply too much that is out of your control. A better way to go may be to focus instead on what is actually manageable: the amount of risk you take. While lower risk usually offers lower rewards, it may also potentially protect your portfolio from loss. This may be especially true over longer periods of time — and when it comes to stock (equity) investments, a long time horizon is essential.

Lucia Capital Group Weekly

A Strategy That May Save You Thousands in Taxes This Year

January 23, 2020

Of all of the bills you pay in your life, your tax bill has to be one of the hardest. Unlike with your credit card bill, or your electric or water bill, you get virtually nothing in exchange for shelling out your tax money. So it stands to reason that you’d like to pay only the absolute minimum amount in taxes over the course of your lifetime, if at all possible. At Lucia Capital Group, we love a good strategy – especially a tax strategy. If you’re in a somewhat high tax bracket, and you want to make a gift to someone in a lower bracket – like maybe your kids – you may be able to do it in a way that benefits both the recipient and yourself.

Lucia Capital Group Weekly

Why Tax Knowledge Is Power

January 16, 2020

You’ve probably heard the phrase “knowledge is power” many times in your life. It’s one of the few near-clichés that’s actually packed with truth. The more you know, the more power you have – either literally or figuratively. The phrase fits especially well when it comes to taxes. Many people find the very concept of taxation, or at least anything beyond the most basic elements of it, to be out of their realm of understanding. And it IS complicated. But sometimes all it takes is a little specialized knowledge in a few key areas for you to put yourself, potentially, in a much better financial situation, both now and in the future. So what is this tax knowledge? What do you need to know that could maybe save you from greatly overpaying your tax bill?

Lucia Capital Group Weekly

Three Smart Money Moves to Make in January

January 9, 2020

The 2020’s have begun, and you may have some wonderful new opportunities for financial planning! While some may tell you it’s never too late to get started, when it comes to money in general, and taxes in particular, waiting to take action may be the worst thing you can do. So now that the yearly calendar has reset, it’s time to think about a few things that you might do to potentially make this year a little more financially rewarding, and maybe a little less taxing as well. January can be a particularly good time, because by planning now, you still have (almost) the entire year to make any necessary course corrections along the way. If you wait to get started, your window of opportunity becomes much smaller. With that in mind, “Professor” Rick Plum is here to give you three smart money moves you should consider making in January.

Lucia Capital Group Weekly

A Better Way to Take Your RMDs

December 19, 2019

Here’s the situation: You’d like to give money to one or more charities this year. You’re also over age 70½, which means that you have required minimum distributions (RMDs) from your IRAs. You’ve decided you don’t really need some (or all) of the RMD to spend, so you’re going to give some (or all) of that RMD money from your IRA to the charity. You take the required distribution, it lands in your bank account, and you then turn around and write a check to your charity. You report the RMD as income, and, if you itemize, you deduct it out as a charitable donation. It should be a net-zero to you tax-wise, right? Maybe not. The way our current tax system works, you may have just subjected yourself to extra taxes by doing exactly that. Is there potentially a better way? Yes!

Lucia Capital Group Weekly

The Top 3 Risks in Retirement

December 5, 2019

What is the essence of financial planning? At its most basic level, it’s really all about risk management. This is true about any kind of planning, really. Whether you’re planning a vacation, a wedding, or a big project at work, it’s the risk side that gets the most attention. The greater you feel your potential risks are, the more detailed your plan is likely to be. When it comes to retirement, people often face more risks than they did during their working years. And while there are probably a dozen or more different types of risk that retired people face, most of them can be placed into three distinct categories: living too long, dying too soon, and getting sick along the way.

Lucia Capital Group Weekly

Social Security’s Unintended Consequence

November 21, 2019

You may have heard that Social Security Administration provides something called “survivor benefits,” where qualifying surviving spouses can receive benefit payments as long as certain conditions are met. These benefits were established back in 1940, when there was primarily one household wage-earner and one stay-at-home spouse. The intent was to ensure that if the wage-earner (i.e., the one with the Social Security benefit) died, the survivor would continue to receive that benefit and not have to worry about taking a cut in income. But now that there are so many two-income households, and thus (often) two Social Security benefits, the survivor benefit rules may actually create the unintended consequence of a real cut in your total benefit amount: ironically, the very problem that the benefit is supposed to solve.

Lucia Capital Group Weekly

Turn Your Roth IRA Into a Super-Roth

November 14, 2019

Roth IRAs can be wonderful savings instruments for people looking for tax-free growth potential. But because a Roth IRA is (of course) an IRA, that means you’re stuck with the relatively low IRA contribution limits of $6,000 (or $7,000 if you’re at least age 50). A 401(k) plan, though, has much higher contribution limits at $19,000 (or $25,000 age 50+). Further, some employers also allow for after-tax contributions to their 401(k) plan, meaning that you could potentially contribute up to $62,000 to your company retirement plan, depending on your age and some other factors. These higher deferral limits may offer you the rare opportunity to eventually roll all of your post-tax money from your 401(k) into your Roth IRA – WITHOUT having to do so on a pre-tax/post-tax pro-rata basis.

Lucia Capital Group Weekly

Why Your Home May Be Your Best Tax Friend

November 7, 2019

So have you thought recently about selling your home? If so, you might be selling at a good time.  The Case-Shiller US National Home Price Index tells us that the average price of homes across the country has gone up about 56 percent since its most recent low level back in February of 2012.  For some people in certain housing markets, that adds up to a lot of gain, especially if they’ve owned their primary home for the past seven years or more. But you might also be concerned that you’ll have to pay a bunch of taxes when you sell because your home has gone up so much in value.  Well, there may be some good news for you.  You may be able to keep most – if not all – of the money you get from the sale of your home.