By: Gaby S. Dominguez

It is an honor to support the mission of the residential program called Youth for Tomorrow, or YFT, which is located in Bristow, VA. Their mission is to provide children and families with the opportunity to focus on their lives.  They provide them with the resources to help develop the confidence, skills, intellectual ability, spiritual insight and moral integrity to implement positive change to benefit the child, the family, the community, and the nation¹. They serve people of all ages whose lives are in crisis. Some levels of care at Youth for Tomorrow include Treatment Group Homes, Crisis Intervention Counseling Services, Outpatient Services, and Intensive In-Home Services.

On Tuesday, December 14, 2021, I had the privilege of gathering gifts for the holidays for teens who are staying at YFT, including the boys who live in the Washington Courage House, and delivering them in-person. I got to speak briefly with Karen Cole, the Director of Community Outreach and Donor Administration, who described how important receiving these presents are for the people at YFT, as many may not have experienced normal holidays prior.

You can read more about Youth for Tomorrow at https://youthfortomorrow.org/.

Additionally, you can read about ways to donate to the cause at https://youthfortomorrow.org/Ways-To-Donate. ■ 

Some of the unwrapped gifts for Youth for Tomorrow

The view on site at Youth for Tomorrow in Bristow, VA

The Washington Cougar House

Footnotes:

¹ Youth for Tomorrow, Our Mission, https://youthfortomorrow.org/Overview

By: W. Kirk Taylor, CFP®

The Holiday Season is upon us, and the end of the year is quickly approaching but there’s still time to take action to lower your tax bill and to check off a few key planning tips to ensure that you are doing everything you can to protect your family’s future.

Minimizing Taxes – below we highlight a few steps you can take to lower your tax bill while getting one step closer to retirement.

Maximize contributions to your employer’s retirement plan.

• Maximizing pre-tax contributions to your retirement accounts is the smartest way to take money out of Uncle Sam’s “tax pocket” and put it in your retirement pocket, all while lowering your tax bill.
• If your employer offers a 401(k), 403(b) or 457(b) plan, you can contribute up to $19,500 on a pre-tax basis and if you are 50 years of age and older at any point in 2021, you can make an additional “catch-up” contribution of $6,500 for a total $26,000.
• If you are self-employed and have an Individual 401(k) or Simplified Employee Plan (SEP), the contribution limits are higher – up to $58,000 for 2021. In the case of the Individual 401(k), you can make both the employee contributions outlined above and your business can contribute to the plan.

Contribute to an IRA.

• Not eligible to participate in your employer’s plan or worse your employer doesn’t offer a plan? No problem, simply make a tax-deductible (pre-tax) IRA contribution before the end of the tax filing deadline of April 15, 2022.
• Contribution limits are $6,000 per person plus an additional $1,000 catch-up contribution, if you are 50 years of age of or older at any point in 2021.

Harvest unrealized losses to offset realized gains.

• If you have taken profits and have realized gains in your investment portfolio this year, congratulations! Be sure to evaluate opportunities to harvest unrealized losses, thereby offsetting previously recognized gains. If your realized losses exceed your realized gains, your excess losses can be to offset ordinary taxable income² up to $3,000. Losses beyond $3,000 are carried forward in any future tax year until exhausted. This excess loss is known as tax-loss carry forward.
• Be sure check the capital gain estimates for your actively managed mutual funds. Most fund companies have announced their estimated capital gain distributions and will distribute those gains in November and December.
• Be careful not to run afoul of the IRS’s Wash Sale Rules which basically states that you must wait at least 31 days before buying back a security you sold at a loss.

Give to charity.

• Gifting cash or appreciated stock to your favorite causes, should be done no later than December 31, 2021. Be sure to allow ample processing time if you are gifting shares of appreciated stock as processing times can be slow at year and during the holidays.
• If you’re subject to Required Minimum Distributions (RMD) and you also plan to give to a qualified charity, you can use some or all of your RMD to make a Qualified Charitable Donation.
• Required Minimum Distributions (RMDs) from IRAs were waived in 2020, but they are once again required in 2021. If you are charitably inclined, over age 72 and subject to taking an RMD, consider giving directly to your charity of choice from your IRA. Distributions that are make directly from an IRA to a charity are known as Qualified Charitable Distributions or QCDs. These make sense as the distribution is not counted as taxable income². Each IRA owner may contribute up to $100,000 directly to charity from their IRA each year.

Contribute to a 529 College Savings Account.

• In most states, contributions to 529 a plan are deductible on your state income tax return. You may also consider front-loading a 529 plan by utilizing a special 5-year gift tax election whereby you make a lump-sum contribution in one year of up to 5 times the annual gift tax exclusion ($75,000 in 2021). Your contribution will be treated as if you’d made a $15,000 gift for each year over a five-year period.

Manage Your Estimated Tax Payments.

• If you are retired and not earning a paycheck, your CPA will likely recommend that you make quarterly estimated tax payments, so that you don’t under pay your taxes during the year. Be sure to make those payments on time. They are due on the 15th of each of the following months: April, June, September, and January (of the following tax year). For more information on managing your estimated taxes check out my May 2019 article Life is Short: Simplify Paying Your Taxes in Retirement.

Accelerate or Defer Income.

• While not a certainty, it is plausible that ordinary income rates and capital gain taxes may increase in 2022 if the Biden administration is successful in passing their proposed spending bill.
• Consequently, it may make sense to realize income or capital gains in 2021. Think through your projected income and/or the possibility of a taxable (capital gain) event for the remainder of 2021 and for 2022.

Financial Readiness – below we highlight items that should be on your checklist each year.

Review Your Estate Planning Documents.

• While most planners and attorneys recommend reviewing your documents every 3 to 5 years, it is really a general rule of thumb. Be mindful of how proposed changes in tax and estate laws may impact your plan. Major life events such as death, divorce, or the addition of a new family member, often mean updates to your documents are needed.

Review Your Beneficiary Designation.

• Double check your beneficiary information to make sure they’re still consistent with your objectives. Major life events such as death, divorce, or the addition of a new family member, often mean updates to your documents are needed. Beneficiary designations are revocable and can be updated or amended as often as needed.

Annual Gifting.

• The annual gift tax exclusion is $15,000 per year, per person in 2021. You can gift up to $15,000 to as many people as you like without filing a gift tax return or incurring a gift tax. If you’re married, you and your spouse can each gift $15,000 to any one recipient. Note that the cost basis for assets gifted to individuals during your lifetime are retained by individual receiving the gift. Assets that are inherited, receive a “step-up” in basis at the death of the grantor.

Health Care Benefits.

• Be mindful of open enrollment dates. For Medicare Part D (2022) enrollment opens October 15th and closes December 7th.
• Your employer will typically have open enrollment in the fall. This a great opportunity to review your healthcare expenses during the year to modify benefits to match your actual needs.
• Be sure to spend down your Flexible Spending Account (FSA) balance before the end of the as these funds are “use them or lose them.”

Definitions:

[1] Adjusted Gross Income (AGI) (line 11 on your 2020 Form 1040) is gross income less certain adjustments. AGI includes all taxable income, including wages, bonuses, self-employment income, taxable interest, dividends, capital gains, retirement distributions, annuities, rents and royalties, taxable social security income, alimony received (with agreement prior to 2019), etc. The most common adjustments that reduce your AGI include one half of self-employment tax paid, alimony paid (with agreements prior to 2019), pre-tax retirement/HSA plan contributions, student loan interest, and certain losses.

[2] Taxable Income (line 15 on your 2020 Form 1040) is AGI less Deductions (Standard or Itemized).

This information is believed to be accurate but should not be used as specific investment or tax advice. You should always consult your tax professional or other advisors before acting on the ideas presented here.  ■ 

By: Mark D. Troutman, PhD, CFP®

Recently I had the opportunity to travel to Italy, specifically Florence and Bologna, as part of a program in which I teach at Johns Hopkins University. The trip was research focused, and I was the resident economist. It was a great immersion into macro matters of trade in the world economy, finance, and policy in general. At the same time, it was a fabulous opportunity to see firsthand the birthplace of modern finance.

Florence was a leading financial center of the Middle Ages and Renaissance. It’s role as a leading city state of the Italian peninsula owed to its ability to cultivate industry, finance, and trade. The ruling families of the city were certainly full of conflict, intrigue, and competition. But the cultural and historical impact of this city endures due to the impact of these same families. Some impressions stuck out to me that inform the work we are doing with clients.

Have a plan

Power struggles were endemic to the city’s history, so turbulence will mark your financial journey. Through external influence, exile, pestilence and financial panic, the bankers and merchants of Florence managed to maintain their long term focus. This is also true with your financial plan – identify your goals, and create a portfolio that aligns with your risks, goals and required return. Then, carry it out in a flexible manner that adjusts to long term trends, rides out short term setbacks and takes advantage of opportunities in the stock market – where the long term trend is upward.

Diversify

The financial power of Florence certainly flowed form the quality of its banking system and currency. But that leading position grew out of the city’s reputation for stellar businesses, particularly in the textiles industry. Many of the leading financial families built their wealth on commerce and then formed their financial enterprises. So with your wealth, and so also with your “human capital” – perhaps the most potent wealth generator you have, and certainly the one over which you have the most direct influence and control.

The “Long Game”

Good wealth generation requires “grit.” The quality marked by perseverance and discipline in pursuit of a long term goal. The visionaries of Florence had plenty of opportunities to be discouraged along the way. They adjusted, bounced back from adversity, and continued to build. The same in true with your financial goals. There will be setbacks along the way. Stick to your plan and stay focused on your long term goals.

Give back. Be a part of something higher

Florence is known as a center of art and culture, which I was privileged to see firsthand during a tour of the Uffizi Galleries. The building itself is a work of art, having been once the office buildings of one of the leading financial families of the city. The collection is priceless, consisting of original works from Michelangelo, Botticelli, Raphael, and a host of others. Much of the collection was made possible by the investment of business and finance leaders.

The business and financial leaders of the city were tough, but also people of faith. They made possible the most meaningful and beautiful building in the city – Duomo or central cathedral. On a personal level, one of the smaller chapels in the city also commissioned by one of the leading financial families “bookended” my professional callings. On one corner was Saint George, the patron saint of my first calling as a soldier and mounted warrior. On the other corner was Saint Matthew, the patron saint of my present calling as a financial professional. Both served as a powerful reminder to conduct our earthly business as a higher calling. It reminded me of why Kirk, Ken and I have invested in the CFP® and CFA® designations – among the few credentials of the financial world that carry ethical codes of conduct.

I think I speak for the entire team in saying that we hold service to you as clients, as a privilege. We seek to partner as we listen to your goals, provide expertise to craft plans, and offer advice and encouragement as you reach your financial milestones. Above all is our firm commitment to place the interests of you, above our own in the journey we take together. ■ 

Saint George, the Saint for Mounted Warriors, photographed by Mark D. Troutman, PhD, CFP®

Saint Matthew, the Saint for Financial Professionals, photographed by Mark D. Troutman, PhD, CFP®

Kirk Capital Advisors is proud to announce that W. Kirk Taylor, CFP® has been elected the President of the Financial Planning Association for the National Capital Area!

The Financial Planning Association (FPA NCA) is the largest organization representing financial planners in the United States. The organization was established as a result of the merger of the Institute of Certified Financial Planners and the International Association for Financial Planning in January of 2000. Overall, the FPA assists in the coordination of the professional and educational development activities in the financial planning field.

Your Team at Kirk Capital Advisors applauds W. Kirk Taylor, CFP® for his determination, leadership, and stewardship of the financial planning profession. ■

By: Mark D. Troutman, PhD, CFP®

The National Association of Business Economists is the leading organization for financial professionals engaged in economic analysis and forecasting. I’ve been a member for over ten years and this past week attended our annual meeting. The gathering included conversations with Secretary of Treasury Janet Yellen, Deputy Chair of the Federal Reserve Lael Brainerd, President of the Chicago Federal Reserve Bank Charles Evans, and dozens of Chief Economists from companies across the world. The meeting provided great perspectives, and I’ve included some highlights below.

Top of the “concern list” was the question of whether this year’s inflation spike will be transitory or permanent. The views were mixed, with a bias toward the view that the present burst of inflation will last longer than expected before abating. In the words of one speaker who leads the Peterson Institute, an economics think tank, “…it is possible for inflation to persist and not be troubling…”

Supply chain disruptions at the root of supply side constraints are worsening, creating a pattern that one CEO from the home building industry described as “rolling price disruptions.” The labor market, another key backup, has been slow to recover owing to caution by workers and a clear preference for remote work. Employers by contrast prefer a partial regathering to offices.

Solutions will lie somewhere in between and will vary by firm, and it will take time to reach the mix of flexibility and gathering. The most serious risk is “wage push inflation” inflation which drowns out income increases brought about by higher wages. Views leaned toward a view of transitory inflation but confirmed the advice we have shared with clients – be vigilant in the short term while they maintain a long-term focus.

The Federal Reserve has carved out a two tools, as one speaker described a “Balance Sheet Policy” and a “Policy Rate Policy.” The Fed will adjust the size of the balance sheet first, allowing its growth to slow toward the end of the year. Upward rate adjustments will follow later, likely in 2022. The Fed’s goal is to curtail support in a controlled manner.

Treasury Secretary Janet Yellen outlined Administration fiscal policy, structured around infrastructure investment, broadband access and environmental improvements intended to facilitate long term growth. Interestingly, there was no discussion about total package sizes for infrastructure and social spending. The approach assumes that interest rates will remain low for some time, making debt finance viable for short and medium term, with adjustments to deficits and debt following later.

Industry breakout sessions highlighted technology improvements. US Industry is as innovative as ever with evidence that COVID accelerated trends that were underway. Warren Buffet is right – it’s a bad idea to bet against the US economy in the long term. I heard about battery technology for transportation and grid storage, zero carbon fuels and technology to improve productivity in labor intensive industries such as education and health care. The manufacturing underlying these shifts drives changes in commodity demand, particularly in rare earths. All these trends hold investment opportunities.

China and its increasingly hostile business climate made the agenda, as the Chinese Communist Party (CCP) seeks to curb excesses and support favored industries. The CCP’s bias toward shutdown to contain COVID proved more disruptive than first believed. Business is still seeking engagement in China even as it moves to diversify supply chains and closely watches CCP policy developments.

The assessment is an environment that includes risks of inflation and policy errors, but a long-term picture that holds promise for productivity improvements and future opportunity. Investors with a clear plan and disciplined execution that includes flexibility to move on unexpected opportunities will best be positioned to realize their goals.■

Treasury Secretary Janet Yellen

Mark Troutman & Dr. Hal Varian, Chief Economist of Google