by Ron Bare
What could your future look like if you invested well? How could you bless your families, coworkers, or community? Over the years, I have gathered 20 principles that guide our investment strategy, and I’d love to share them with you!
- God is the owner and I am the steward. What do you own that God hasn’t blessed you with? He owns everything we have, which should encourage us to steward and invest it wisely and generously.
- Learn the secret of being content. Contentment drives away the continual need for more. See Phil. 4:12, Heb. 13:5
- Passing on wisdom is better than passing on wealth. Wealth doesn’t last. Wisdom does. Wisdom gets passed on and on, yet wealth vanishes with one decision or circumstance.
- Live generously. God blesses you so you can bless others. Plus, do you know any unhappy generous people? No? Me neither!
- Build margin into your time and money. Time margin allows you to serve, volunteer, and mentor. Financial margin allows you to invest, donate, and have enough when things go badly.
- Borrow cautiously and repay debts quickly. Repaying debts gives you financial freedom to invest, donate, or save for your kids and grandkids.
- Save 10-15% of your income. Saving helps you prepare for unexpected opportunities or crises. This is a practical way to build financial margin into your life!
- Own companies (mutual funds, ETF’s, and individual securities) and real estate. Once you’re an owner, hold these investments long-term.
- If it seems too good to be true, it is! If you’re skeptical or suspicious, seek wisdom from trusted advisors!
- Don’t blindly follow the crowd. Trends are temporary and will fade. The opposite of the crowd is often best!
- Don’t make financial decisions primarily to reduce taxes. Tax reduction is a great benefit. However, this shouldn’t be the driving force for financial decisions.
- Hold unwavering faith in the future. This is not for the faint of heart! Don’t become pessimistic in investing, rather trust companies will prosper and trends will continue upward in the long term.
- Diversify, diversify, diversify! Ecclesiastes 11 encourages us to invest in many different ventures, as we can not predict the future nor what will succeed.
- Invest within the context of your financial plan, goals, and values. Use your plan, goals, and values as a guide for where, when, and how much to invest.
- Be careful of the words “this time is different. ”The truth is, it’s probably not. Look for, study, and learn from patterns in the financial world!
- Build a trusted team of advisors. “Without counsel plans fail, but with many advisers they succeed,” says Proverbs 15:22. Who are your advisors? Where do you go for wisdom?
- Don’t waste time predicting what the markets will do in the short term. No one knows what they will do in the short term! Not you, not the professionals, not internet opinion articles, no one! Don’t waste your time.
- The best time to start investing is today! Don’t wait for the perfect time.
- Be careful with gold (perhaps 3-5% of your portfolio). Usually gold is sold out of fear of potential catastrophes in the world. Personally, the gold I buy is jewelry for my wife so we can enjoy it while we hold it!
- Never make an emotional financial decision. Emotions are good, but when it comes to finances, lean on wisdom, experiences, and your advisors.
These principles can’t promise a life of perfection and wealth. But they can promise to be a good starting point when learning to invest well. If you’re interested in talking more about investing, give us a call!
by Curtis Burkholder
As we continue to discuss ways to have an “Impact” with our time, treasure, and talents, we wanted to highlight that tomorrow is “National 529 Day”! This day was established to focus on the importance of planning and saving for college – through what is known as the 529 plan. By utilizing a 529 plan, you can help impact someone’s educational life. As you know, education can be expensive. The 529 plan is an excellent way to purposefully plan to save for an individual’s education – whether that be your child, grandchild, or another special child in your life. If you do not know what a 529 plan is, you are not alone! Keep reading to learn more about how these accounts can be a helpful and impactful tool when saving for college or K-12 private education.
The 529 plan received its name because it was authorized in section 529 of the Internal Revenue Code. It does not actually have anything to do with the May 29th other than it’s a great date to highlight this plan! The 529 is a college savings plan that allows individuals to save for college on a tax-advantaged basis without paying federal taxes on its growth – but only if it is used for qualified higher-education expenses. A few years ago, the tax laws were updated to allow families to use funds toward a private elementary or secondary education-up to $10,000/year per beneficiary.
If you contribute funds into a 529 account and the original beneficiary does not need the funds for their education, the beneficiary can be changed to another family member. This provides flexibility in funding and planning for education expenses as funds can be transferred between different siblings as well as down their family line.
It is also important to understand the tax treatment of 529 accounts. There are tax advantages for contributions into a 529 account. Each state has established their own plan with an investment company so you will receive a state tax deduction for any amount that you contribute into a 529 account. However, if you live in Pennsylvania, you may claim a deduction for a contribution to any state’s 529 plan. This means that you have a wide range of investment providers to choose from for the 529 account. This also means that you can contribute to 529 accounts for your grandchildren even if they live out of state.
Another important element to consider is how 529 distributions are treated from a tax perspective. If the funds are used for qualified education expenses, there are NO taxes due on the distributions. However, if the funds are not used for qualified education expenses, the earnings of the non-qualified distributions will be subject to income tax and a 10% federal penalty tax.
Almost anyone can open a 529 account including parents or grandparents. No matter who opens a 529 account, anyone can contribute to the account for the student. If you have grandchildren, you can contribute to their college education by establishing a 529 plan for their benefit or using one that is already established. This can also be useful if your grandchildren attend private school, as you can help cover the cost of their education and get a state tax deduction for any contributions made into a 529 account. The funds in the 529 account can then be withdrawn to be used to pay for the private school tuition.
Hopefully, you have gained a better understanding about 529 plans, as well as the advantages to using them. If you wish to learn more about 529 accounts and how they can be used for your children or grandchildren with great impact, please contact our office and we would be happy to discuss this with you in greater detail. Happy National 529 Day!
Securities America and its representatives do not provide tax advice; therefore, is is important to coordinate with your tax advisor regarding your specific situation.
The CARES Act is an acronym for Coronavirus Aid, Relieve, and Economic Security Act. Below are some thoughts specific to our industry that might be helpful to you:
- 2019 IRA Contributions: The 2019 IRA contribution deadline has been extended with the tax-filing deadline until July 15th. Make sure that you communicate with us if your contributions are intended to be for prior-year.
- Early Withdrawal Penalty Waiver: The CARES Act also waives the 10% early distribution on distribution of up $100,000 from IRAs and plans for individuals who meet the requirements of being affected by the coronavirus. The tax would still be due on pre-tax distributions, but could be spread evenly over three years, and the funds could be repaid anytime during the three years.
- 2020 RMDs: The Act included a waiver for required minimum distributions (RMDs) for 2020. This waiver applies to company savings plans and Traditional and Inherited IRAs. If you would like to stop your 2020 RMDs, please contact our office.
- Charitable deductions: The Act creates an above-the-line charitable deduction for 2020 (not to exceed $300) with a cash donation to charity, this particularly useful for those using the Standard Deduction on their tax return but still give. If you itemize your deductions, the bill also modifies the AGI limitations on charitable contributions for 2020, to 100% of AGI for individuals and 25% of taxable income for corporations. The bill also increases the food contribution limits to 25%. The prior AGI limit was 60% for individuals. Donor-Advised Fund Limits were unchanged, so if you are desiring to maximize the individual or corporate increases, the increased giving must be directly to a qualified charitable organization.
The Bill that was passed is over 800 pages long and covers many things from stimulus, to loan programs, to one-year changes in tax laws, and more. Please stay close to your accountants, attorneys, and bankers for applicable opportunities this Act provides. Feel free to reach out to us if you have questions as to how this Bill impacts you and if we don’t know the answer, we’ll point you to someone who does.
If you anticipate receiving a stimulus check, it would be a good time to prayerfully consider how best to use that money since it was not in anyone’s plans as the year started. If you haven’t been financially impacted by the COVID-19, perhaps consider extra levels of generosity to help those who have needs.
Thank you again for trusting us to walk with you on your stewardship journey.
Paying Taxes with Thanksgiving
by Jeremy Walter
“A sign of good stewardship is paying taxes with thanksgiving.” – Ron Blue.
We may have just lost most of our readers one line into this article, but bear with us – while we do believe this is an extremely difficult concept to embrace, we also believe it’s a Biblical truth. We’ll examine specific Bible passages shortly, but first off, we’ll lay out a couple of straight-forward contextual points regarding taxes.
First, there are a lot of taxes that we pay as citizens of the United States: income, sales, estate, inheritance, gift, property, Social Security, and capital gains are all a solid start to the list. So when we mention taxes, we’re thinking about more than just the marginal income tax we all pay.
Secondly, there is a fundamental and systematic difference between tax evasion and tax reduction. Tax reduction is a legitimate financial goal. Tax evasion isn’t just illegal; it’s immoral and would violate Biblical commands.
And lastly, we want to point out the direct correlation between income and incomes taxes due. Ron Blue used to counsel clients that if they truly would like to reduce their tax liability, the most straight forward approach to doing so is to reduce their income. Not many people were excited to do that. As difficult as it is to grasp, a higher tax bill is almost always indicative of higher income or appreciation, both of which would be favorable gifts from God.
Tax reduction, although a worthy goal and smart stewardship, should never be the tail that wags the dog in your overall financial and stewardship planning.
Remember, true stewardship is the ongoing recognition that we are temporarily managing assets that ultimately belong to God. This would include our ability to receive income. True stewardship would see that income, from whatever entity it comes from, as ultimately coming from God. This recognition of God’s ownership is hugely important to paying taxes with thanksgiving. Why?
How we manage money – including the payment of taxes – is a direct reflection of our integrity. God uses money as a tool in our lives, to test and to mold us in preparation for other non-material aspects of our present and future lives. Luke 16:10 says “He who is faithful in a very little thing is faithful also in much; and he who is unrighteous in a very little thing is unrighteous also in much.”
Jesus himself speaks directly about paying taxes, as recorded in Luke 20:25 to “render to Caesar the things that are Caesar’s.” Similarly, when the Jewish tax collectors came to collect the temple tax in Matthew 17, Jesus also said to Peter to pay it so as to not cause trouble. In a sign of God’s provision to honor such an act, the tax for both Jesus and Peter is paid from a coin that Peter pulls out of a fish’s mouth after Jesus tells him to cast a fishing line into the lake.
Paul also addresses this in Romans 13:6-7 when he states to “Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed.”
We don’t need to look too far in our culture to find perceived reasons to pay less than our legal obligations to our government: “everyone else is doing it,” “I don’t want to support an irresponsible government,” “It’s a non-productive use of money,” and “I disagree with the government” are all commonly stated opinions. But none of them hold up very well in light of what we’ve talked about above.
Ron Blue actually says, out loud, with each quarterly tax estimate he pays: “Thank you, God, for providing me the opportunity to pay this tax.” How can he get to this point?
He says that the secret to paying taxes with joy and with thanksgiving is to stop thinking about the money as OURS, and truly believe and act that it is God’s. If we do so, and if we believe that He has placed our current tax laws and government in place and expects integrity from us, this actually becomes possible. We’re able to see his hand of provision in our lives. It doesn’t mean we don’t do effective (and legal) planning to potentially reduce our tax liability, but it does mean that we can pay taxes free of guilt or shame and actually bring honor to God in our ability to do so.
Securities America and its representatives do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.