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Reminders (2017.04)

Some big deadlines approaching!  In an effort to lighten up these quarterly reminder emails, I have decided to include the funniest event I witnessed in the past three months.   Sadly, I’m finding that these stories are usually at my expense. I was picking up Lillian at day care last week and I thought I was having a good day thus far.  She was outside and there is a small gate separating the big kids from the toddlers.  A football was thrown over the barrier on accident and I went to pick it up and throw it back.   It was of course a weak throw and you would think that the 8 or 10 year old kid I was returning it to would make fun of me for that.  Instead he caught the ball and looked at me for a second.  Then he mockingly said ‘nice hair’, laughed, and ran back to his friends.   The closest items due in the list below are: 1)  April 18, 2017 – Federal 2016 income tax payment deadline, regardless if filing for an extension.   2)  April 18, 2017 – Federal 2016 income tax filing deadline for individuals if not filing for an extension.   3)  April 18, 2017 – the estimated payment deadline for Q1 2017 income.   4)  April 18, 2017 – traditional and Roth IRA contribution and correction deadline for 2016   5)  April 18, 2017 – HSA contribution deadline for 2016.   6)  April 18, 2017 – 401(k) excess deferral correction deadline for 2016.   7)  May 31, 2017 – In most Texas counties, you must protest your property taxes... read more

2016 – Q3 Revew and Election Reaction

Thank you for your interest in our Q3 Review.  Please be on the lookout for the hard copy of my firm update coming in January.  There will be two big pieces of news within that update involving some new opportunities in 2017.   What follows is an overview of the third quarter of 2016 and a requisite review of the events happening since.  The unpredictable results of this election cycle have had quite an effect on the markets.  At the highest level, domestic equities have taken off since November 8, while nearly every other asset class (foreign equities and all types of bonds) have been hurt.   I’ll get into a bit more detail of these events first before moving on to a discussion of Q3 and the expectations for remainder of Q4. Election Reaction I read many articles on “What Trump Means for Our Nation’s Economy” or “How the Election Will Impact the Market”.  Most of these predictions were premature, and many were just flat out wrong.  The rush to get these articles out whether right or wrong to get clicks actually mirrors the overreactions of the market.  These first three weeks since November 8 are a predicable reaction to an unpredictable occurrence.  Any time a surprise happens in investing, or in life for that matter, our first impulse is to react to an extreme.   A successful investor remains reasoned and constructs a portfolio to get him where he or she needs to go, without taking unnecessary risks. The market has viewed President-elect Trump with great hope for our domestic businesses. Domestic large cap equities in total were up... read more

Reminders (2016.11)

In an effort to lighten up these quarterly reminder emails, I have decided to include the funniest thing that happened to me in the past three months: A few months ago I was waiting in line to check into a hotel in San Antonio and there was a woman in front of me who was nearly finished checking in.  The man behind the desk gave her a cookie and some waters and the woman said, “Oh perfect, this will be a nice evening as I sit down to watch the Bachelorette and eat this cookie.”  The man behind the desk said, “You’re welcome”, and the woman left.  I walked up to start the check-in process.  At the end the guy asked if I wanted a cookie.  I joked “No, just the Bachelorette for me thank you.”  Without hesitation the man quipped, “Yes I figured you for a no-cookie, Bachelorette kind of girl.”  I stared at him, then frowned, put my head down and retreated to my room. The closest items due in the list below are: 1)  December 31, 2016 – this is the spending deadline for your Flexible Spending Account (FSA) unless your employer allows the optional grace period which extends the deadline to March 31, 2017.  Please check with your employer to see if the option exists. 2)  December 31, 2016 – the deadline to convert your Traditional IRA, SEP IRA, and SIMPLE IRA funds to Roth status.  This is the deadline for the ‘Backdoor Roth’ strategy.  Please be careful if converting a portion of your total Traditional IRA, SEP IRA, and SIMPLE IRA funds, as you will have... read more

2016 – Q1 Review

You don’t have to say it, I know you missed your quarterly update!  Better late than never – here is my admittedly belated Q1 review.  The story of these first 3 months?  Bonds, bonds, and more bonds.  And to be more specific, foreign bonds.  Stocks were down big to begin the year then rebounded quite nicely to end the quarter relatively flat.  Domestic bonds performed a better domestic stocks as the market corrected from an overestimated rise in rates.  The market usually overestimates the steepness and timing of the rise in interest rates, and this time was no different.  This initially hurts bonds, but as markets come back to reality, bond returns improve.  This happened as the market prepared for the Fed’s first rate increase in December 2015.  The market overreacted and bond prices suffered leading up to the rate hike more than they should have.  Now the market has come back to reality and wow!  Bonds have been the best performing assets year to date.  Foreign bonds fared even better as bond investors looked abroad for even better returns.  Bonds continue to be a valuable part of your diversified portfolio even when rates are at historic lows.   Domestic Equities     As discussed in the intro, there was nothing to write home about domestic stocks in the first quarter.  Dropping nearly 11.0% over the first 40 days, blue chips then rallied to end the quarter up 1.2%.  Mid-size and smaller companies performed worse than their larger brothers.  The unemployment figures are now hovering around 5.0%, not improving but still at a relatively healthy figure (1).   Home prices... read more

Reminders (2016.04)

In an effort to lighten up these quarterly reminder emails, I have decided to include the funniest thing that happened to me in the past three months. Back in February, my parents, sister, and I were sitting outside at their house and talking.  My dad brought up how much better their backyard was than mine.  When Christina and I moved into our house, the backyard was basically just grass, and I have been planting trees and trying to get it built up for the past two years.   Unfortunately, probably 1/3 to 1/2 of the stuff I have planted has died.   The rest of the trees remaining vary in height from 4 – 12 feet tall.  My dad said, “Don’t worry Matt, your backyard will grow and be nice one day, but too bad you probably won’t live to see it.”  My sister quipped, “Neither will his trees!”  Then they all made a family trip to Germany together and left me here to write this reminder email.   The closest items due in the list below are: 1)  Individual income tax filings are due (without extension) by April 18, 2016.  Why not April 15 this year?  Emancipation Day (celebrating the day Lincoln signed the Compensated Emancipation Act in 1862, freeing over 3,000 slaves in the District of Columbia) is usually celebrated on the 16th.   The 16th happens to fall on a Saturday this year, so they pushed up the federal holiday to Friday, which in turn pushed the income tax due date to Monday. Please note that even if you extend your filing date, your actual income taxes are still... read more

2015 – Q4 Review

OK – let’s get right to it.  I was incorrect in my projection of the 4th quarter of 2015.  I believed that domestic stocks would continue their decline and bonds would be the benefactor.  Instead the opposite happened.  However, as you have probably seen in this first month of 2016, my suspicions have been confirmed as we are experiencing a slight correction.  Luckily I felt the same way on January 1 as I did on October 1, and our discretionary portfolios at Interactive Brokers have outperformed the benchmark portfolio.  Of course, outperformance does not always mean positive returns but limiting losses is just as beneficial.  Anyone can make money when the market is thriving.  How a manager performs in stressful times is a better gauge of his or her acumen.  What follows is a review of the 4th quarter as well as 2015 as a whole.   Domestic Equities Domestic blue chips rallied after a weak 3rd quarter to end the year up 0.8%.  Employment figures again improved, with the unemployment rate falling 0.1% in Q4 to end the year at 5.0%.  (1).  For the full year, US employers added 2.7 million jobs and the unemployment fell to 5.0% from 5.6% at the end of 2014.  Home prices strengthened over the year rising nearly 6% (2).  However, corporate earnings are showing continued weakness as the energy sector struggles and a stronger dollar continues to hurt the earnings related to international operations.  The estimated earnings per share of the S&P 500 for the full year 2015 was over $131 per share on December 31, 2014.  Today, estimated earnings for the full year are... read more

Reminders (2016.01)

Happy New Year men, women, and children!  Actually if your child is reading this, I think its safe to say she’s on track to be a huge nerd like me, which is of course a good thing.  I know I’ll be reading this to our daughter later tonight. It’s time for our quarterly reminder email.  The closest items due in the list below are: 1)  Quarterly estimated federal income tax payment is due January 31, 2016 for the period September 1, 2015 through December 31, 2015 2)  Payments of 2015 property tax for Texas counties are generally due by January 31, 2016 3)  The due date for corporate 2015 income tax returns is March 15, 2016. 4)  The due date for partnership 2015 income tax returns is April 15, 2016. 5)  The due date for individual 2015 income tax returns is April 15, 2016. 6)  The deadline to contribute to an HSA to be counted for your 2015 income taxes is April 15, 2016.   The single contribution limit for 2015 is $3,350.  The family contribution limit for 2015 is $6,650.  Those aged 55 and older may contribute an additional $1,000. 7)  The deadline to contribute to a traditional or Roth IRA to be counted on your 2015 income taxes is April 15, 2016.   The contribution limit is $5,500.  Those aged 50 and older may contribute an additional $1,000.   2015 Federal Income Tax Filing Deadlines                 Tax Filing                             Original Date                      Extension Date (1, 4) Individual                            April 15                                 October 15... read more

Social Security Facts You Need to Know (Part 2 of 2)

Social Security can be daunting.  The Social Security Handbook has over 2,500 rules defining the benefits you may be entitled to under the program!  At Composed Financial, we continually try to simplify the process for you.  That is why we are proud to say we are now utilizing ‘Maximize My Social Security’ – a paid online service that we are providing to all our clients for free.  It incorporates your personal details and lays out the best filing plan so you and your family can be sure to get the highest benefit available. In the 1st of our 2 part Social Security series, we described the most common types of benefits available.  This final part will lay out some strategies that are soon expiring that you can use to maximize your benefit.   We will show some details of our new tool ‘Maximize My Social Security’ as well. A Form of Insurance At its core, Social Security’s retirement benefits should be viewed as a type of insurance.   The benefits protect you at a time when you are no longer earning income.  You can’t outlive Social Security.  You can outlive your retirement assets (401ks, IRAs, etc.).  Our tool ‘Maximize My Social Security’ uses a default ending age of 100.  You may reduce that if you have a poor family history of longevity, but you should still be conservative and put it past what you might consider to be your expected date of death.  The reason is because the worst case scenario (from the viewpoint of providing you a comfortable income in retirement) is that you outlive your life expectancy.  That means... read more

Social Security Facts You Need to Know (Part 1 of 2)

Social Security can be daunting. The Social Security Handbook has over 2,500 rules defining the benefits you may be entitled to under the program. At Composed Financial, we continually try to simplify the process for you. That is why we are proud to say we are now utilizing ‘Maximize My Social Security’ – a paid online service that we are providing to all our clients for free. It incorporates your personal details and lays out the best filing plan so you and your family can be sure to get the highest benefit available. In the 1st of our 2 part Social Security series, we are laying out the most common types of benefits available. Part 2 will lay out some strategies that are soon expiring – as well as some that are not expiring – that you can use to maximize your benefit. We will show some details of our new tool ‘Maximize My Social Security’ as well. Common Types of Benefits Retired worker – 40 quarters of coverage is the maximum needed to become fully insured under Social Security; the retired worker receives a reduced amount if benefits started at age 62 to before normal retirement age, a full amount at normal retirement age, and an increased amount if the worker delays benefits until age 70. Normal retirement age is 67 for those born in 1960 and later. Spouse of retired worker – receives up to half of the worker’s benefit as calculated at worker’s normal retirement age. The benefit is limited by maximum family amount – which is generally 150% to 180% of the worker’s benefit. Divorced... read more

Texas Transfer on Death Deed

For those of you that wish to avoid probate in the state of Texas, a new law passed in September makes it easier to transfer real property outside of probate. Assets passing through your will pass through probate.  It is a public process.  Some may desire a more private process.  Generally only very specific assets pass outside of probate such as 401(k)s, IRAs, community property, assets in a living trust – just to name a few.  Effective September 1, 2015, this new law permitting Texas Transfer on Death Deeds can help real property pass outside of probate as well. A common question about the new law is whether married couples should file such a deed.  Texas is a community property state, so any community property owned by the couple passes outside of probate automatically to the surviving spouse.   Generally, as long as a married couple has an updated will, a transfer on death deed is of less importance in regards to the community property.  However, if a spouse dies intestate (without a will), the surviving spouse has to file additional paperwork and a transfer on death deed could make the process easier. This law is of particular importance to single individuals and married couples possessing separate real property who wish for their real property to pass outside of probate. Some quick facts about the Texas Transfer on Death Deed: 1)  It must contain a description of the property 2)  Name one or more beneficiaries 3)  Each beneficiary must be a person 4)  Must be recorded with the County Clerk in the same county that the property is located 5) ... read more