Independent wealth management firm, Archford Capital Strategies, provides 12 strategic ideas on how individuals can take advantage of the current market conditions.
1. Convert an IRA to Roth IRA – the balance of your current IRA is probably lower compared to the beginning of the year. You can convert some, or all, of the investments inside your Traditional IRA to a Roth IRA. Those investments should have time to recover inside a Roth IRA where that appreciation would be tax-free. Note: you will have to pay ordinary income taxes on the value of the investments on the day the Traditional IRA is converted to a Roth.
2. Consider reducing the long-end of a bond ladder (and timing) – most long-term bonds have seen a jump in value. It’s hard to imagine there is much upside room given where interest rates are. Also, consider margins against these if you need liquidity short-term as rates are low. There are a lot of bonds being sold so pricing should be better in a couple months.
3. Reduce or eliminate High-Yield Bonds – these are the companies that could have a difficult time paying their debt with significant business interruption. This also assumes you view High-Yield Bonds as a risk-reduction element in your portfolio. We do not like them currently as a yield enhancer to fixed income portfolio because of principal risk. If you are using in a portfolio then consider as equity risk.
4. Quicken the pace of your dollar cost average investment plan – if you have a plan to invest cash over the next 12 months, consider speeding that up.
5. Refinance your home or other debt – review the interest rate on your mortgage to see if it makes sense to refinance. I have a feeling many people are doing this right now so you may need to be patient with the lender. Also, business owners should look into new SBA lending programs.
6. Consider accelerating the funding of Retirement accounts (SEP, 401k, IRA) or Education Savings Plans- if you normally contribute to these.
7. Tax Extension – The IRS has extended the April 15th deadline to July 15th – Preserve your cash if you owe until the filing date.
8. Family Gifting - Remember NOT to give family members assets with a loss (better to sell the asset yourself so you can preserve the tax loss)... then give the money. Note: If you are giving assets to family members when the market is down, then you can give more shares of the security.
9. Charitable Giving - If you or your spouse are over 70.5 years of age use your traditional IRA for charitable gifts. If you are over 70.5 years of age and know your children are philanthropic, this may be a good year to contribute on behalf of your child to their charity. Again, you should never give a security to a charity where you have a loss. Sell it first and realize the loss for tax purposes. People under 70.5 should use their donor-advised fund this year for gifts. The donor-advised fund investment strategy is probably more conservative than the assets you contributed to the fund. This also preserves your personal liquidity. One may postpone gifts of securities until the end of the year. Often when there is a sharp pull back in the market the recovery can be quite swift. There has been a lot of reference to this pullback in the market and the 1987 “crash” but remember the market was positive for the year at the end of 1987.
10. Pull cash from your line of credit even if you don’t yet need it. We have seen banks reduce lines of credit in the past on the unused portion at a time when you could need it most.
11. If your business income will be down, then review the new marginal tax rates to potentially make additional strategic tax moves.
12. If you own your building, take a hard look at a Sale-Leaseback especially now with the current interest rate environment. A Sale-Leaseback is when you sell the building that your business occupies and then sign a long-term lease to rent it back. This could provide additional liquidity that could be put to work in other areas of your business. This also can help diversify the overall percentage of assets you have tied directly to the business.
“We are always eager to share thought leadership in response to economic, policy or tax law change. Our team is constantly monitoring the current environment and looking for opportunities to respond to change, which is constant,” said Jim Maher, CEO of Archford Capital Strategies.
About Archford Capital Strategies
Archford Capital Strategies, a private wealth management firm founded by James D. Maher, is represented by a skilled team of advisors with more than 35 advanced degrees, professional designations, accreditations and certifications. Archford Capital Strategies offers a wide range of financial services to clients and specializes in closely held businesses, foundation management, retirement plan management, wealth transfer strategies and concentrated stock strategies. Archford Consulting, LLC is a non-investment advisory subsidiary of Archford Capital Strategies, specializing in business transition, working with closely held businesses on increasing enterprise value, facilitates inside buyouts – employee, management or family, outside transition – third party or private equity. They source solutions throughout the entire capital deck from debt financing to equity infusions. For more information, please visit www.archfordcapital.com.
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