Ask the experts - Iris Sagrado & Glenn Stears, financial planners
Last updated 12/11/2019 at 4:38pm | View PDF
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Investors have a lot to celebrate in 2019, with the Dow Jones Industrial Average up nearly 20 percent this year. But with big gains come the potential for considerable tax liability if those profits are not prudently managed. That's where Iris Sagrado and Glenn Stears of 360Blue Financial Strategies in Hinsdale come in.
"Mutual fund companies have a lot to distribute in terms of capital gains, so the probability of people being hit (with taxes) and caught by surprise is greater than last year," Stears said.
Sagrado said IRAs have become an even more attractive tax shelter this year after the IRS raised contribution limits, based on one's age.
"If you're under 50, you can put up to $6,500 this year into an IRA or a Roth IRA. If you're 50 and over, you can do up to $7,000 on those accounts," she said.
Another option that grandparents, in particular, are drawn to is a 529 College Savings Plan, of which many states have their own version.
"Now the time to get (the savings plan contribution) in and give it as a Christmas present," Sagrado remarked.
That's not to suggest parents can't open a 529 account, as well.
"(They) can get a tax deduction, also," she noted.
Sagrado urged people who turned age 70 1/2 in 2019 to make sure to take out their required minimum distribution.
"Because if you don't, they charge you 50 percent of whatever needed to come out for the year for any IRAs," she said.
"We want to make sure nobody falls through the cracks," Stears added, citing cases where funds were transferred from one carrier to another but the RMD was not tracked. "We've worked really hard to make sure that nobody gets caught by surprise."
Diversifying one's holdings is a sound strategy for clients, he stressed.
"They might have some that's in tax-free and some that's in tax-deferred and some in long-term growth," Stears said. "We can help through how they have their money positioned and lessen the amount of taxes that they pay."
December is also a time when clients' thoughts turn to estate planning to provide for their loved ones.
"Everybody's thinking about family," Sagrado said. "Sometimes they have to change their beneficiaries or set up those wills and trusts."
The two teamed up in 2008, a partnership boasting more than half a century of financial planning experience (39 years for Stears, 13 for Sagrado).
"What we've always found is that clients pick up on the chemistry that we have together," Stears commented.
"We still have Glenn's first client from 1980!" Sagrado interjected.
They said the Great Recession is still fresh in people's minds and influencing their appetite for risk. Stears said people's attention now should be on the making the right decisions for an optimal fiscal position heading into 2020.
"As of Dec. 31, a lot of things get locked in," Stears said, while noting that IRA contributions can be made up to April 15. "Being prepared and attending to the details is a lot of what we're doing."