Tax Considerations for Year-End

From the Desk of Charlie McCullough

Charlie McCulloughAs the year comes to a close, I look forward to a restful and enjoyable time with my family and friends. Lisa and I are anticipating having the whole family together for the holidays as our son, Sheldon comes back from his senior year at UW-Madison, and our daughter, Callie is home from her first semester of her freshman year in college.

In addition to family festivities, there are a lot of year-end housekeeping details with regard to our investments. Just a couple of weeks ago, I met with my advisors at Financial Fiduciaries to discuss any considerations before the end of 2015.

The market drop in the third quarter led some fear driven investors to sell their mutual funds. When a mutual fund has a large amount of holders selling their shares, it forces them to liquidate their profitable positions that they would otherwise prefer to hold. Due to the panic selling, this has triggered capital gains in many mutual funds. Mutual funds usually distribute these capital gains in December. If you hold these mutual funds in a taxable account, Uncle Sam and possibly the state you live in, will want their share of the gain too.

This means if an investor was not paying attention, they may end up with a bigger than expected 2016 tax bill because of these distributions. Thankfully, I have the fee-only advisors at Financial Fiduciaries to keep track of these considerations for me. My advisor recognized the issue and then balanced out the sell off activity to reduce the tax impacts of the Q3 market volatility.

I was told that this kind of development is also a reason why it is a good idea to put instruments like mutual funds (over which there is little tax control) inside IRAs or other tax deferred accounts and use instruments where there is more tax control in taxable accounts. In this way, developments like that of Q3 have no impact.

With a market that is constantly shifting, it is so important to have an advisor on my side that I can trust. The team at Financial Fiduciaries always ensures my portfolio is maximized for the most profitable end-result and consistently guides in making sound financial decisions that will help me reach my retirement goals. I am thankful for another year with them on my side.

Charlie and Lisa McCullough are fictitious characters who are utilized to illustrate situations in which people might find themselves.  Their family and friends are also fictitious.  While their stories are inspired by actual situations encountered by Financial Fiduciaries professionals working with clients and prospective clients, they are not intended to provide any specific investment advice.  Each situation is different and any general advice provided in the context of these articles may not be suitable for all individuals.  Always consult a professional for advice specific to your situation.

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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