With the new year approaching fast, the Neighbor interviewed three local veteran financial advisors about what guidance they would give residents regarding their portfolios for 2019 and the new year.

All three said this year has been a strong one for their clients in terms of the markets and investments, with the Dow Jones Industrial Average closing at 28,239.28 Dec. 18, near its all-time high.

Sandy Springs resident Joe Sroka, chief investment officer at NovaPoint Capital in Midtown, said paring off gains and losses for tax purposes should be done before 2019 closes.

“A lot of stocks have advanced this year,” he said. “If people want to considerer using appreciated stock for their charitable giving, that would b e tax advantageous between now and year’s end.”

Sroka said while there are few new tax laws taking effect in 2020, since the federal revamping of tax laws took place in the last few years, there is at least one strategy investors can take.

“Certainly interest rates remain low, so if residents aren’t earning any reasonable return on their cash, it’s always a good strategy to pay down higher interest rate debt,” he said.

Buckhead resident Jeff Schultz, founder of Schultz Wealth Management, part of Janney Montgomery Scott LLC with its office in Buckhead, said his group has been advising clients on charitable giving strategies for year’s end.

“I would say it’s threefold,” he said. “For those over 70½ in age, they should consider donating their IRS required minimum distribution from an IRA. It can be donated tax-free to charity. (For) others under 70½, we’re suggest donating appreciated stock or ETFs (exchange-traded funds) to avoid paying capital gains and retaining liquidity. Lastly, tax-loss harvesting and swaps to reduce capital gains in mutual funds or individual stock portfolios before year-end will help reduce the overall capital gains tax bill for 2019.”

Schultz said one new policy coming in 2020 called the Secure Act is something senior citizens should be aware of.

“There’s a policy in the works that may increase the age required to take distributions from an IRA,” he said. “That may go from 70½ to 72, which would be great for those who don’t need that money and allow it to accumulate tax-deferred longer. Unfortunately, the act also eliminates the “stretch IRA” strategy and might require beneficiaries to liquidate IRA’s within 10 years of inheritance.”

Sandy Springs resident John Inhouse, managing director and market executive for Merrill Lynch Wealth Management Atlanta in Buckhead, said residents should meet with their advisors to make sure they have a financial plan and strategy in place.

“With markets at or near all-time highs, for many of our residents and investors, their 401Ks and portfolios are also at all-time highs,” he said. “Now is a perfect time to build an in-depth financial plan and also to really understand behavioral finance and investing. Behavioral finance is s something we’ve been doing for our clients for years, but it’s even more and more important with markets at an all-time high.

“(Investors) want to make sure their investment approach truly matches their personally meaningful goals and objectives, but also they need to understand behavioral finance and their mindset, desired approach and most importantly their purpose for investing. Many people don’t want take the time to talk about financial planning (over the holidays) but instead spend more time planning (something else like) their spring break. We just find that people without a financial plan in place can become overconfident when the markets are high and tend to take more risks than they should.”

Inhouse also recommends investments such as a donor-advised fund and a 529 Plan at year’s end. The first allows one to take an immediate tax deduction on a lump-sum charitable contribution while being able to make contributions over several years under that fund. The second gives parents and grandparents a way to set aside funds for a child’s college education.

“My point is I think that tactically it’s important to understand the year-end tax contributions, maxing out your 401K contribution or, if you’re older, putting more aside in your IRA,” Inhouse said. “… Strategically, all too often We see people make mistakes when the market is at an all-time high because they don’t have a financial plan to follow.”

Regarding strategies for 2020, he said, “One of the things to think about is on short-term and long-term capital gains, that they understand them. They need to understand the difference, and there are obviously tax consequences.”

The three advisors made some predictions about the economy and markets in 2020, especially since it’s a presidential election year.

“We don’t expect 2020 to be as fruitful in the markets, but we do typically find election years result in decent returns,” Schultz said. “I would suggest investors rebalance or adjust their portfolios to prepare for greater volatility in the new year.”

Said Sroka, “Employment remains strong, yet inflation seems well contained, so generally it’s a good opportunity for individuals to save more because wages should be going up higher than the level of inflation. In your personal budget, you have excess cash generating each month. It’s always more prudent to save that or invest it instead of spending it on items that don’t create long-term value.”

Inhouse added, “Because we truly don’t know what’s in store or what the election holds, it makes all the more sense for residents to clearly embrace A financial plan and fully embrace behavioral finance.

“The reason I hit that so hard is now is the time where markets can create a feeling of thrills of optimism and euphoria, when they begin to correct then anxiety and fear set in and people without a plan become desperate and sell at the wrong time. Your investments should be by plan design and not just a random purchase of an investment without a plan or purpose.”

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