“Wealth is not his that has it, but his that enjoys it.” – Benjamin Franklin

Contrary to the popular saying, money can buy happiness, but only if you spend it in the right way. Behavioral economists and social psychologists have studied this topic – the intersection between money and happiness – quite a bit in recent years, and we can all benefit from their findings.

As you might expect, up to a certain income level, money helps to eliminate anxiety and increase the feeling of security. For example, having more money may mean you worry less about grocery shopping, going out to eat, or paying your mortgage. Nobel Prize-winning research shows that increasing one’s annual income from less than $25,000 to $50,000 can make you more than twice as happy. However, once you have the income to meet basic human needs, it seems additional income doesn’t provide much in the way of additional happiness. A more recent study reveals that the payoff in happiness level for income increases over $95,000 is slight.

So, if you consider yourself relatively affluent and lucky when it comes to material wealth, how do you maximize your assets to bring greater happiness?

Let’s talk first about what doesn’t work. If you are looking for lasting happiness, you will want to avoid buying more “stuff.” That’s because although we might think a new sports car will make us happy, what we are imagining is the first day we own that car, when it is bright, shiny, new and exciting. As we grow used to owning the car, it no longer offers the same thrill and our happiness returns to the status-quo, pre-new-car level.

There are, however, ways to spend money that have been shown to provide a greater level of contentment and joy. One, for instance, is to spend money on others. In one experiment, 46 students were given $20 to spend. The students who were told to spend the money on others – treating a friend to lunch or donating to charity – were happier at the end of the day than those who had been instructed to spend the money on themselves. Shopping for and purchasing the perfect gift, and then seeing the joy on another’s face when they open that gift, provides much more lasting contentment than buying something for yourself.

Giving to charitable causes that are important to you also tends to produce a high level of contentment. Using your money to do good in the world, and seeing the impact of those efforts, results in a feeling of well-being not found in material goods.

Another category of spending to consider involves experiences. When researchers interviewed study participants about their recent purchases, they found that money spent on activities such as plays, concerts or dinners out brought far more pleasure than material purchases.

Think about your last vacation. What do you remember? What really sticks? Those memories that bring a smile to your face are in fact an ongoing source of contentment and joy. To further extend the joy from your next trip, try to savor the time you spend planning and looking forward to the journey, and take lots of photos while you are there so that you can review and revisit them when you get home.

Our options for experiences may be limited due to concerns over and the effects of the COVID-19 pandemic. This might be a good time to explore experiences you can enjoy from home. Ever wanted to learn to paint, become a better cook, or speak French? Classes in these and many other topics abound online. Perhaps you could team up with a child or grandchild to take a class together, even though you might not be together in person.

An often underappreciated way to spend your money is on saving yourself time. There are many tasks that you may not enjoy, for example, doing the laundry, house cleaning or yard work. Consider spending money to eliminate these tasks that do not bring you joy so you can use the time on something that does.

Interested in examining your own spending habits? Track your purchases for a month and categorize each purchase as either an experience, material good or gift for others. At the end of the month, look back over the list and think about the pleasure each purchase brought you, and for how long. Do you notice a pattern?

Money may not be the only key to happiness, and likely not the most important one. However, thinking about how you spend your money, and choosing wisely, can go a long way in bringing joy to your life.

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by featured authors are their own and may not accurately reflect those of Buckingham Strategic Partners. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

Susan Strasbaugh, CFP®, EA, AIF®, 6/3/2020

IRN-20-511

November 20, 2020/by Matt Delaney

Thanksgiving Gratitude

Announcement, JDH Blog

Thanksgiving Gratitude

We want to take a moment to focus on and celebrate this Thanksgiving season with you. We know it has been a tough year, but we also know that Thanksgiving is a time to count our blessings and express our gratitude.

With that being said, we want to extend our deepest appreciation for being entrusted as your wealth advisors throughout the pandemic, and beyond. It is our honor to be able to advise you and yours during such challenging times.

In good times and bad, being able to help others maintain their financial well-being adds meaning to our lives. For that, we are eternally grateful.

We wish you and your families all the best this Thanksgiving holiday.

Yours in gratitude,

Matt, Tim, and Eric

November 17, 2020/by Matt Delaney

Planning for Uncertain Times

Articles, JDH Blog, The BAM Alliance

November 3, 2020

Planning for Uncertain Times

With this week’s election and ongoing health and economic concerns related to COVID-19, uncertainty remains high, as it has for most of 2020. Unfortunately, this is likely to continue well into 2021 on health, financial and societal fronts. As investors, it’s never enjoyable to navigate periods like this, so we wanted to step back and reinforce our perspective on financial markets as we head into the close of 2020 (and if you are anything like me, it can’t come quickly enough). We’ll do this by reiterating three principles.

1. Financial uncertainty is the source of expected long-term gain.

Over time, it’s been well established that stock markets in virtually all countries have achieved higher long-term returns than safer investments. Without doubt, the primary reason this is true is because markets can go through stretches where they fall precipitously because of economic and political events or lengthy periods where stock markets underperform safer investments. Investors collectively understand this and price stock markets to provide expected returns above those of high-quality fixed income markets.

While it’s always tempting to believe that you can participate in these expected rewards without experiencing all the risk, the evidence is clear this is extremely difficult to do. As a result, as challenging as it can sometimes be, we believe the correct approach is to stick with your long-term plan 1) if you have been comfortable with it up to now, and 2) it is expected to achieve your long-term financial goals with high likelihood. This second part is key because the rigorous planning processes we employ incorporate the likelihood of poor market results occurring at one or more points during your lifetime.

2. Global markets have gone through periods of substantial uncertainty before and will in the future.

We have reliable records of the performance of the U.S. stock market going back to 1900. Here is a brief list of some of the most notable events that the U.S. market has navigated:

Financial panic of 1907
Establishment of the Federal Reserve central banking system
World War I
Spanish flu
Great Depression
Collapse of the gold standard
World War II
Cold War
Korean War
Vietnam War
Inflationary pressures of the 70s and 80s
Tech bubble of the late 90s
Contested Bush-Gore election of 2000
Great Financial Crisis of 2007–2009

This is not, of course, to say that the U.S. market can’t go through an extended period of poor performance, as this has actually happened on three different occasions (late 1920s through early 1940s, late 1960s through early 1980s, and the late 1990s through early 2010s), but it does show the long-term resilience of financial markets, illustrating the point that markets have generally done a good job of pricing the risk it exposes investors to.

3. Diversification remains as important as ever.

While one can never ensure taking more risk will lead to higher returns, we can reduce uncompensated risks through diversification. For most of the investors we work with, one of the most important steps to take is diversifying stock market risk across individual companies, countries and industries. I’ll focus here on diversification across countries.

We have been through a period of dominant performance of the U.S. market relative to all other countries. This has tempted some investors to question whether it might make more sense to increase their allocation to the U.S. market relative to other countries. Yet, in the stretch we’re currently going through, it’s clear there are a multitude of scenarios related to the election and coronavirus that could conceivably impact U.S. markets more negatively than other markets. The way to reduce this risk is diversification across countries. This same way of thinking can be applied to any number of other investing examples and — without the benefit of hindsight — the correct answer is most always diversification.

Remember, your financial plan is designed to help you weather turbulence, and these aren’t the first events to spur investor uncertainty, nor will they be the last. As your partner, we’ll continue to see you through stretches of uncertainty, making sure that your investment and financial planning strategies help position you to achieve your long-term goals.

Author

JARED KIZER

Chief Investment Officer

As Chief Investment Officer and chair of the firm’s Investment Policy Committee, Jared evaluates findings from academic research and applies that learning to architect the firm’s investment strategy.

@JaredKizer

November 5, 2020/by Matt Delaney

Presidential Election Reflection

JDH Blog, News, Videos

November 2, 2020/by Matt Delaney

Six Tips for Prepping Your Home for Autumn

JDH Blog, JDH Newsletter

Article courtesy of George Peterson Insurance Agency, 10/20/2020

AS THE TEMPERATURE starts dropping and harsher weather looms in the coming months, now is the time to get your home ready. Taking steps now to protect your home and belongings can help you enter the new season worry-free, and you might save money in the process. You can follow these tips to do just that:

1. Clean your furnace and switch out filters
Check your furnace for soot, ignition problems, pilot-light health and the state of other components to make your home ready for fall. You should also clean up dust and dirt and if you see anything that could spell trouble, call for an inspection. This is also a great time to switch out your filters as you’ll probably be using your heater, which draws air from the outside. You may also need to winterize your outdoor air conditioner unit, depending on the type of system you have. This usually involves cleaning your coils and covering the unit.

2. Check your insulation
Fix insulation issues before the cold weather arrives. You’ll need to climb up to your attic or crawlspace during daylight hours, which is the best time to spot any rays of light in the corners.
You should only be getting light from attic vents. If you see light in a corner, it could mean you have cracks somewhere or you need to replace some of your insulation.

3. Tend to your fireplace
Clean out your fireplace, check your chimney for blockages and make sure that your damper is working smoothly. If your chimney is coated in soot, you need to have it cleaned to prevent fire hazards. For gas fireplaces, vacuum out any dust and check that the pilot light is properly turned on.

4. Insulate pipes
When temperatures drop below freezing, standing water in your pipes can start to freeze. This can ruin valves and even crack brittle pipes, leading to leaks and water damage. If your pipes aren’t protected or you have installed new plumbing, you can get your home ready for the cold by insulating your pipes. This can be done with simple foam sleeves.

5. Inspectscreens and windows
Check your window screens to make sure they aren’t bent and don’t have holes. Also, check your window weatherstripping to make sure the felt is intact and not letting any drafts through.

6. Clean your rain gutters and downspouts
Climb up on a ladder with a garden hose and flush out your rain gutters to remove natural debris like twigs and leaves. After flushing them, don a pair of gloves as you will have to likely dig in there with your hands to get the rest of the debris out. Also, check the gutters for damage and repair as needed.

October 21, 2020/by Matt Delaney

Relief for Retirement Account Owners

JDH Blog, JDH Newsletter

The BAM ALLIANCE, 8/4/2020

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. Since then, the U.S. Treasury Department has issued guidance to clarify and, in some cases, expand the provisions of the CARES Act dealing with retirement accounts and the relief offered to retirement account owners and/or beneficiaries.

We’ll answer some questions you may have about this new guidance and how it could impact you.

I understand that Required Minimum Distributions (RMDs) are not required this year. Has this changed?

No, RMDs from any IRA, 401(k), 403(b), governmental 457(b) or federal Thrift Savings Plan account are still suspended for 2020. RMDs for beneficiaries of these accounts are also suspended for 2020.

I already took some or all of what I thought was my 2020 RMD. Is there a way for me to get that back into my account?

Yes, in late June, the Treasury Department released IRS Notice 2020-51, which provides substantial relief to taxpayers who took distributions of what would have been RMDs but for the CARES Act. In short, any 2020 distributions that were already taken and would have been an RMD can now be rolled back into an IRA or qualified plan by Aug. 31, 2020.

What about the 60-day rollover rule?

For distributions taken earlier this year that would have been RMDs (if not for the CARES Act), Notice 2020-51 extends the 60-day rollover window to Aug. 31, 2020. As such, if you took such a distribution and would like to return it (to a retirement account), you have until then to take action.

I already completed a 60-day IRA rollover within the past year. Can I still “fix” my unwanted 2020 “RMD”?

Yes! Notice 2020-51 provides relief for IRA owners who would otherwise be impacted by the once-per-year rollover rule. More specifically, rollovers of distributions that have already been received, and that would have been 2020 RMDs but for the CARES Act, will be disregarded for purposes of the once-per-year rollover rule, provided the rollover is completed by Aug. 31, 2020.

Is the rollover relief available for beneficiaries as well?

Yes! In an unprecedented move that surprised many observers, the IRS is even allowing beneficiaries to return unwanted 2020 distributions (that would have been RMDs, if not for the CARES Act). The rollover must be deposited back into the inherited IRA that it was withdrawn from, and the deadline to complete the rollover is again Aug. 31, 2020.

I had federal and/or state income tax withheld from distributions I already received. Will that money be put back automatically and if not, what do I do?

If you had taxes withheld on your RMD, and you only roll the net amount (the amount you received after taxes were deducted) back into your IRA, then the amount of tax withheld will be taxable on your 2020 tax return. As an alternative, if you have the ability to “make up” the amount withheld with other funds, you can roll the full amount of your distribution (the amount you received, plus the taxes that were withheld) back into the IRA. That will eliminate any taxation of your RMD in 2020, because the entire amount will have been rolled back. You will still receive credit for the taxes withheld when you file your 2020 income tax return, though, so you may want to talk to your tax preparer and adjust your estimated taxes to take the withheld amounts into account.

Has the IRS expanded the availability of Coronavirus-Related Distributions?

Yes. In June, the IRS released Notice 2020-50, in which it significantly expanded
the conditions for which an individual may qualify to take a Coronavirus-Related Distribution. More specifically, individuals who have had pay or self-employment income educed due to COVID-19 and individuals who have had a job offer rescinded or the start date of a job delayed due to COVID-19 are now eligible to take such distributions. In addition, Notice 2020-50 extends the ability to take a Coronavirus-Related Distribution to those who have had a spouse or household member financially impacted by the situations described in the CARES Act and as added to by Notice 2020-50.

As a result, those eligible to take a Coronavirus-Related Distribution now include:

Anyone, plus their spouse or dependent, who is diagnosed with COVID-19 by an approved test.
Anyone who experiences adverse financial consequences resulting from the individual, spouse or household member who:
Is quarantined, furloughed, laid off or has work hours reduced due to COVID-19.
Is unable to work due to lack of childcare due to COVID-19.
Is closing or reducing hours of a business they own or operate due to COVID-19.
Has pay or self-employment income reduced due to COVID-19.
Has a job offer rescinded or start date of a job delayed due to COVID-19.

As a reminder, benefits of Coronavirus-Related Distributions, which are limited to a maximum combined amount of $100,000 from all retirement accounts and which must be taken in 2020, include the following:

Exemption from the 10% early distribution penalty for those under age 59½.
By default, the income from the distributions is split evenly on the 2020, 2021 and 2022 income tax returns. Alternatively, taxpayers may elect to include all the income in 2020.
The distributions may be rolled over (repaid) for up to three years from the date the distribution is received, thus eliminating the income taxes that would otherwise be owed on the distribution.

The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. IRN-20-686

October 21, 2020/by Matt Delaney

Educate Your Heirs

JDH Blog, JDH Newsletter

Connie Brezik with Buckingham Strategic Partners, 2/20/2020

One of the best gifts you can leave your heirs is education about money in general and your financial affairs specifically. This can include passing along your ethics and values.

You may have become knowledgeable about finance, investments, income taxes and estate planning because you have been successful and have had years of experience. For someone who doesn’t handle these things, all of this can seem like a big black hole.

There are reasons you may choose to handle all the financial issues on your own. Maybe you understand and like dealing with the family finances, or you feel you are doing your spouse and children a favor, or you are protecting your heirs and you want to keep tight control.

But it can be cruel to not teach your spouse and children about finances. As adults, we all need to be competent in handling finances. We won’t always have someone else around to take care of this for us. And if you are no longer around or capable of managing everything, your heirs will need to know what to do.

Your children may be young or haven’t yet gotten past living paycheck-to-paycheck. They could be raising a family, paying a mortgage and investing in a business of their own. These are good reasons to learn important financial lessons, and you want them to understand the meaning of money in their own lives.

Passing on a legacy of sound wealth management has many virtues. It could prevent your heirs from making many mistakes due to lack of knowledge. It may help ensure your estate lasts for many generations. It will also give you confidence that your family is equipped to handle things when the time comes.

You may have concerns about leaving your children and grandchildren with large sums of money or other assets. These concerns can be addressed with proper estate planning and by tackling issues directly with your heirs.

I’ve found the best way to educate children is to start from a very early age. Involve them in age-appropriate discussions and allow them to make their own mistakes and develop good money habits.

Doing everything for a spouse and keeping them in the dark is a real disservice. One day your spouse may need to pay all the bills, take care of the house and car and take care of you. Ensuring your spouse has the know-how and confidence that they need is an act of love.

Family meetings can be a great way to introduce your heirs to your finances. You can bring in your other advisers, such as investment advisers, CPAs, insurance agents and estate attorneys. The goal is for your heirs to know your team of advisers and for this team to know your family. Your heirs will understand who to call when and if they need help.

If you have a family business, it is critical to get everyone involved in how to run the business. Find out early which children and/or grandchildren may be interested in taking over the business and which ones will be capable. You may find that none of your family is interested. Knowing this early will allow you time to figure out how to sell the company or transition it to other qualified employees. Good succession planning and training on all aspects of running a business will help with a smooth transition when the time comes for you to exit.

Leave your heirs a legacy of knowledge and financial confidence. Your family will appreciate this more than you can know.

This commentary originally appeared February 2 on TheCasperStarTribune.com

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE^®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

October 21, 2020/by Matt Delaney

Income Planning and IRMAA in Retirement

JDH Blog

Angela Muckler, Relationship Manager with Buckingham Strategic Partners, 8/27/2020

Medicare is an area that practically every American will encounter when planning for retirement. It sits at the intersection of health and wealth in your financial life plan, and so often surfaces across a range of long-term planning conversations. Plus, Medicare and its associated costs can be a confusing topic, given the program’s various parts, costs, and benefits. With approximately 10,000 Americans becoming eligible for Medicare every day, navigating these decisions in a cost-effective manner can be a daunting task without some guidance.

Medicare Coverage Options: The Basics

Simply put, Medicare generally has two main enrollment options, which include five main components. Everyone signs up for Parts A and B, but then the path diverges. To help cover what Parts A and B do not, you have a choice between 1) a Medicare Supplement Plan (also called a Medigap Plan) and Part D, or 2) a Medicare Advantage Plan. The following diagram illustrates how these two enrollment options fit together.

Medigap Plans are typically more expensive than a Medicare Advantage Plan but provide more overall coverage. While Medigap Plans are offered by private insurance companies, plan benefits are regulated by Medicare regardless of what company you buy coverage from. The only variable is the premium that each company charges. Your Medigap Plan will be accepted anywhere that original Medicare is accepted, which can offer welcome peace of mind. What’s more, you aren’t restricted to specific doctors and generally do not need a referral to see a specialist. While the plan premiums may cost more, you know you will almost certainly have coverage should any medical issue arise in the future and additional out-of-pocket costs will be limited.

Medicare Advantage Plans (that is, Part C) have been gaining attention because they are marketed as a no- or low-cost option that wraps everything into one plan. Think of these plans as a Medicare HMO. While many of these plans do provide additional benefits, such as dental or vision, you should keep a few things in mind. Medicare Advantage Plans usually work within a network of preferred doctors and hospitals, require referrals to see a specialist, and they are not always accepted by all health-care providers. Also, if you travel, even within the U.S., there is a big chance your plan will not be accepted in other states, possibly resulting in higher out-of-pocket costs if you need medical care away from home. Lastly, these plans can change yearly, so you’ll need to review them annually to ensure the plan you have is still a good fit for your needs.

The Cost Part of Your Equation

Besides considering what coverage to apply for, it’s important to be aware of the potential costs associated with Medicare. While most people pay the standard monthly Part B premium of $144.60 and their Part D premium for medical and prescription drug coverage, if your income is above a certain limit, extra surcharges will likely apply.

Due to the Bipartisan Budget Act of 2018, if you are considered a high earner or you are an individual with modified adjusted gross income (MAGI) greater than $87,000 or a married couple filing jointly with MAGI greater than $174,000, you will have additional charges that apply to your Part B and Part D premiums. Medicare refers to these surcharges as income-related monthly adjustment amounts (IRMAAs). The premiums for 2020 vary from an additional $57.80 to $347 for Part B and $12.20 to $76.40 for Part D.

Medicare uses your income from your tax return from two years ago to determine your premiums for the current year. This means your 2021 premiums will be based on your 2019 MAGI. This information is shared annually between the Social Security Administration and the IRS, so there is no way to avoid these reviews.

The next time you find yourself in an income tax planning conversation, keep this two-year look-back in mind. If you have future income coming in a lump sum, such as from selling a business or cashing out on restricted stock, you may want to consider taking those payouts more than two years prior to signing up for Medicare, if possible, to avoid paying these surcharges. The good news for people who are in this situation and have received one-time, lump-sum income is that they will only pay a higher amount for one year, as new premiums are calculated annually.

Once you’ve signed up for Medicare, you should receive a notice letter from the Social Security Administration toward the end of each year with your premium amounts for the next year. There are specific instances in which you can file an appeal to have your IRMAA adjusted, but generally, these are limited to certain major life events, such as you recently stopped working, marriage, divorce, or death of a spouse.

When planning for what your retirement might look like, keep these IRMAA adjustments in mind, and consider strategies that may help you avoid paying these additional surcharges. Going just $1 into the next tier means paying that larger surcharge for an entire year. Viewing IRMAA in the context of your financial picture as a whole and in conjunction with various income planning and tax strategies – from making qualified charitable distributions and funding a health savings account to the timing around when to realize capital gains/losses and take Social Security benefits – could play a part in potentially reducing your health-care expenses in retirement.

The contents of this post are for informational and educational purposes only. The analysis contained in this publication disseminated by Buckingham Wealth Partners (BWP) is based on the data and information available at the time which may become outdated or otherwise superseded at any time without notice, and the opinions. Certain information contained therein is based upon third-party sources, which BWP believes to be reliable, but is not guaranteed for accuracy or completeness. Buckingham Strategic Wealth, LLC and Buckingham Strategic Partners, LLC, collectively Buckingham Wealth Partners. IRN-20-960

September 8, 2020/by Matt Delaney

Benefits of Rebalancing

JDH Blog

Connie Brezik with Buckingham Strategic Partners, 8/27/2020

Diversifying your investment portfolio means putting together a mix of stocks, bonds and other investments with your financial goals, time horizon and risk tolerance in mind. Your mix is called your asset allocation. The idea behind diversification is that, overall, owning different kinds of investments should earn you higher returns with less risk than holding any individual investment.

Establishing the mix, or asset allocation, right for you is one of the most important factors in determining long-term investing success. But then you must do the ongoing maintenance necessary to produce your desired results and control your risk. This occurs through a process called rebalancing, which restores your portfolio to its original asset allocation and risk profile.

Each investment in your portfolio will increase or decrease in value at varying rates, changing your asset allocation. Asset classes, or groupings of similar types of investments, will have months, years or even decades when they outperform or underperform other asset classes. Examples of major asset classes are stocks or equities, bonds or fixed-income investments, and real estate or other tangible assets. Each major asset class can be further categorized into greater detail. For example, equities can be broken into large cap, small cap, U.S. (domestic), international, growth, value and other buckets.

Think about it like preparing a balanced meal to include a protein, vegetables, fruit and grains. Specifically, you could have chicken, asparagus, watermelon and whole wheat rolls. Or you may want BBQ ribs, french fries, roasted peppers, cantaloupe and chocolate cake.

You can rebalance in a couple ways. You can get back to your desired asset allocation when you add or withdraw funds. A way to generate cash is to let dividends pay out instead of automatically reinvesting. Another method is to sell investments in an asset class that has increased in value beyond its set percentage and purchase investments in asset classes that have declined in value.

You do not want to rebalance too frequently, and you certainly want to be aware of whether doing so will generate taxable income. Rebalancing with added cash has its advantages. This can limit the number of trades you need to make (and thus trading costs) and minimize taxable capital gains. You may want to delay rebalancing if it incurs short-term capital gains, as they are taxed as ordinary income. If capital losses can be harvested, you want to take advantage of that situation.

Let’s look at a brief, hypothetical example of how rebalancing works. Ron and Sally set a desired asset allocation of $500,000 of equities and $500,000 of fixed income for their $1 million portfolio. Their target is to stay within 5% of this 50% stock and 50% fixed income mix. Over the past two years, equities have performed well, and this portion of their portfolio has grown to $700,000. Their portfolio’s fixed income value also has risen, to $530,000. They now have a portfolio worth $1.23 million with 57% in equities and 43% in fixed income. This new allocation has too much risk for them, and they decide to sell $85,000 of equities and reinvest that cash into fixed income to restore their original 50/50 allocation.

Another benefit of knowing your portfolio is built to maintain a risk profile that you can tolerate is the calm and peace of mind it will lend you in years like 2020, when volatility has been higher than in the recent past and abandoning stocks may have looked tempting.

Using a diversified portfolio that you monitor and rebalance periodically will help you stick to your investment strategy and manage your risk.

This commentary originally appeared August 2 on TheCasperStarTribune.com

By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.

This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. IRN-20-776

September 3, 2020/by Matt Delaney