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Company Stock in a 401k?  Consider Net Unrealized Appreciation (NUA)

When leaving a job for whatever reason, one of the biggest decisions you will face is what to do with your 401(k).  If your plan includes shares of your company's stock, NUA is something to consider during this process.

The Basics of NUA:

  • Net Unrealized Appreciation (NUA) can provide a significant tax break for those holding low-basis employer stock in their retirement plan.
  • There are strict rules that must be followed to take advantage of the NUA option.
  • NUA can provide an additional level of planning flexibility.

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Earnings on Fire

There are a lot of factors when evaluating a company for purchase. Whether one buys a business or franchise, the cash flow and expected cash flow that the company generates will play a large role in the purchase price. While other factors play a role, the same holds true for purchasing stocks. The cash flow, or earnings, are evaluated to help determine the purchase price. Public companies are reporting 2018 first quarter earnings results and the numbers are looking great.

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The B Word...Bonds That Is

We need to talk about bonds more and understand them better. Almost everyone talks more about stocks. Stocks are in the news and get the headlines. Stocks are easier to understand. But bonds are an essential asset class in almost every investor’s portfolio. Fixed income grows in importance as investors grow older. For younger investors, bonds may still serve a purpose-either to fund a specific future cash need or to lessen portfolio volatility.

This article starts with a short primer on bonds and then explains how we at Robinson Smith Wealth Advisors construct bond portfolios and manage the associated risks.

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Using an Exchange Fund to Diversify Concentrated Stock Risk

What is an exchange fund?

Exchange Funds or “Swap Funds,” are private placement limited partnerships or LLCs.  An Exchange Fund allows an investor to “exchange” an individual stock for shares in a fund of many pooled stocks. Here are some of the key benefits and drawbacks to an exchange fund:

Benefits:
  • Provide immediate diversification
  • Allow a larger investment amount to grow (stock owner avoids selling stock, paying taxes, and reinvesting lesser amount in diversified investments)
  • Potential increase in value if the Exchange Fund outperforms the original stock
  • May accept contributions for restricted securities

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Using an IRA QCD: Consider Giving Your IRA RMD to Charity

This post was originally published in February 2018 and has been updated to reflect 2019 tax law changes.

If you have reached 70.5 in age and have an IRA, you may benefit from donating all or a portion of your IRA required minimum distribution (RMD) to charity. By making a qualified charitable distribution (QCD), you may avoid tax on your RMD to the extent of the QCD.

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Volatility is Back, as Stocks Drop

On Friday last week the Dow dropped 665 points. Monday, the market was down most of the day but come late afternoon the selling accelerated dramatically. At one point, the Dow was down 1600 points. It rallied back some and ended Monday down 1175 points. Many are wondering what happened and why did the markets fall so far, so fast?

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7 Strategies for Dealing With Your Concentrated Stock Position

This article was updated on April 10, 2019 to reflect current tax laws and limits.

There’s an old investment saying, “Concentrated wealth makes people wealthy, but diversified wealth keeps them wealthy.” One of the most common concentrations of wealth people have are large or concentrated stock holdings in a single company. Publicly traded companies often compensate employees with stock or stock options, especially upper-level executives. Others may have large holdings from investing early in an initial public offering (IPO) or inheriting a large holding. No matter how it was obtained, owning a large stock position creates investment and planning challenges.

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Why Are Stocks Still Going Up?

Stocks have been going up ever since the Presidential election last November. There have been no significant pullbacks along the way, and stock market highs are reported by the media on a weekly basis. Clients are asking “Why are stocks still going up?”

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Charitable Giving Made Easy with Donor-Advised Funds

This article was originally posted in September 2017 and has been updated to reflect new data and the Tax Cuts and Jobs Act of 2017.

What is a Donor-Advised Fund?

Donor-advised funds (DAFs) go by many names.  They are called charitable gift funds, charitable funds, giving funds plus others.  For this article, I will refer to them by their legal definition, Donor-Advised Funds (DAFs).  A DAF is a fund maintained and operated by a sponsoring charitable organization which has legal control over the funds.

How Does a DAF Work?

  1. An individual, or donor, contributes cash or securities to a DAF account. Stocks and bonds are commonly used for funding.  Some DAFs may accept real estate, restricted stock, and non-publicly traded securities as well.  A minimum contribution is required and many of the larger DAF sponsors require minimums between $5,000 - $25,000. 

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Happy Birthday Economic Expansion

As June came to a close, the current economic recovery and expansion turned eight years old. That is the third-longest expansion on record since the end of WWII. That’s according to data compiled by the National Bureau of Economic Research (NBER), which marked the end of the Great Recession in June 2009. The NBER is the arbiter of recessions and expansions for the U.S. economy. It bases its calls on data that includes employment, sales, income, and industrial production.

Birthdays are a time for celebration. But when economic expansions start getting older most don’t want to party. Investors usually start fretting over how long it will last.

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