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STRATEGI ES & I DEAS
FOR T H E C HAR L ES
SC H WA B COM MUNI T Y
FA L L 2020
Fly Right
1 Reboot your finances 2 Rightsize your risk tolerance 3 Buy and sell the smart way
Page 13 Page 22 Page 26
Schwab clients can save on
home loans with exclusive discounts.
0.250% 0.500% 0.750%
interest rate discount interest rate discount interest rate discount
$250K - $999K $1M - $4.9M $5M+
in qualifying assets1 in qualifying assets1 in qualifying assets1
The more qualifying assets you have with Schwab, the more
you may save on home purchase or refinance loans.1
Call Quicken Loans at 877-524-2932 or visit schwab.com/mortgages to get started.
Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value
In order to participate, the borrower must agree that the lender, Quicken Loans, may share their information with Charles Schwab Bank, and Charles Schwab Bank
will share their information with the lender Quicken Loans. Nothing herein is or should be interpreted as an obligation to lend. Loans are subject to credit and collateral
approval. Other conditions and restrictions may apply. This offer is subject to change or withdrawal at any time and without notice. Interest rate discounts cannot be
combined with any other offers or rate discounts. Hazard insurance may be required.
1. Investor Advantage Pricing (IAP): Loans are eligible for only one Investor Advantage Pricing discount per loan. Select mortgage loans are eligible for an interest rate
discount of 0.250% - 0.750% based on qualifying assets of $250,000 or greater. Discount for ARMs applies to initial fixed-rate period only. Qualifying assets are based
on Schwab and Schwab Bank combined account balances, including select brokerage, bank, and retirement accounts.
For more information, please visit Schwab.com/IAP.
Quicken Loans is licensed in all 50 states. Quicken Loans Inc.; NMLS #3030; www.NMLSConsumerAccess.org. Equal Housing Lender. Licensed in 50 states. AL: License
No. MC 20979, Control No. 100152352; AR, TX: 1050 Woodward Ave., Detroit, MI 48226-1906, (888) 474-0404; AZ: 1 N. Central Ave., Ste. 2000, Phoenix, AZ 85004,
Mortgage Banker License #BK- 0902939; CA: Licensed by Dept. of Business Oversight, under the CA Residential Mortgage Lending Act and Finance Lenders Law;
CO: Regulated by the Division of Real Estate; GA: Residential Mortgage Licensee #11704; IL: Residential Mortgage Licensee #4127 – Dept. of Financial and Professional
Regulation; KS: Licensed Mortgage Company MC.0025309; MA: Mortgage Lender License #ML 3030; ME: Supervised Lender License; MN: Not an offer for a rate lock
agreement; MS: Licensed by the MS Dept. of Banking and Consumer Finance; NH: Licensed by the NH Banking Dept., #6743MB; NV: License #626; NJ: New Jersey
– Quicken Loans Inc., 1050 Woodward Ave., Detroit, MI 48226, (888) 474-0404, Licensed by the N.J. Department of Banking and Insurance.; NY: Licensed Mortgage
Banker – NYS Banking Dept.; OH: MB 850076; OR: License #ML-1387; PA: Licensed by the Dept. of Banking – License #21430; RI: Licensed Lender; WA: Consumer
Loan Company License CL-3030. Conditions may apply. Lending services provided by Quicken Loans Inc., a subsidiary of Rock Holdings Inc. “Quicken Loans” is a
registered service mark of Intuit Inc., used under license.
Charles Schwab Bank, SSB and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Brokerage
products offered by Charles Schwab & Co., Inc. (Member SIPC) are not insured by the FDIC, are not deposits or obligations of Charles Schwab Bank, SSB, and are
subject to investment risk, including the possible loss of principal invested. Charles Schwab & Co., Inc. does not solicit, offer, endorse, negotiate, or originate any
mortgage loan products and is neither a licensed mortgage broker nor a licensed mortgage lender. Home lending is offered and provided by Quicken Loans Inc. Quicken
Loans Inc. is not affiliated with The Charles Schwab Corporation, Charles Schwab & Co., Inc., or Charles Schwab Bank, SSB. Deposit and other lending products are
offered by Charles Schwab Bank, SSB, Member FDIC and Equal Housing Lender.
Charles Schwab Bank, PO Box 982605, El Paso, TX 79998-2605
©2020 Charles Schwab Bank, SSB. All rights reserved. Member FDIC.
(0820-0759) ADP111156OI-00 (05/20) 00247090
Fall 2020 CONTENTS
5 13 26 30
D E PA R T M E N T S F E AT U R E S
2 SCHWAB ORIGINALS PERSPECTIVES 22 Reassessing Risk
Learn, listen, and watch. 13 What investors can do How much risk can you really
to rebuild their finances. handle? The answer may
By Rob Williams surprise you.
3 CEO’s NOTE
Whatever your circumstances, 16 How to choose the right
we’re here to help. target-date fund for you. 26 Investing Mindfully
By Walt Bettinger By Michael Iachini The secret to more
purposeful investment
17 Using investment losses to decisions.
THE BOTTOM LINE your advantage.
5 Outsize gains + outsize By Hayden Adams
losses can = long-term success. 30 Get Cracking
Convert your nest egg into a
7 How much tax to withhold in 20 TRADING reliable monthly paycheck.
retirement. Three Schwab Trading Services
professionals on regrouping
8 What to know before adding after a market crash.
socially responsible investments
to your retirement portfolio.
34 SPOTLIGHT
9 Shopping for bonds. Moving money on schwab.com; On Investing (ISSN 1523-5327) is published
quarterly. This publication is mailed at Standard
Schwab Stock Slices™;
A postal rates. ◆ If you prefer not to receive
Personalized Portfolio Builder. On Investing, please call 888-484-5340.
11 ASK CARRIE ◆ POSTMASTER: Send address changes to On
Social Security for families. Investing, Charles Schwab & Co., Inc., P.O. Box
982600, El Paso, TX, 79998-2600. On Investing
By Carrie Schwab-Pomerantz 40 ON YOUR SIDE does not assume any liability resulting from
Perseverance pays off. actions taken based on the information included
By Charles R. Schwab in this magazine. Mention of a company or
security does not constitute endorsement.
Some contributors to On Investing may have
active positions in securities or companies
discussed in this issue. MAG105672Q320-00
O N T H E C O V E R : S C U L P T U R E B Y D I A N A B E LT R A N H E R R E R A FA L L 2020 | ON INVESTING | 1
SC HWAB O R I GI NA L S
Learn Listen
Whether it’s when to adjust your risk exposure, how Join Wharton professor and decision scientist
to sell in a down market, or where to find decent Katy Milkman for Season 6 of our podcast
yields, we answer your most-pressing investment Choiceology™. Listen and subscribe at
questions at schwab.com/volatility/faqs. schwab.com/choiceology.
Watch Follow
Schwab’s Trading Up-Close videos unpack key Fixed income @kathyjones
trading concepts and explain how to use a variety of International @jeffreykleintop
fundamental and technical indicators. Watch now at Markets and economy @lizannsonders
schwab.com/trading-up-close. Personal finance @carrieschwab
Research @schwabresearch
Trading @randyafrederick
Washington @miketownsendcs
(0820-0LYD)
Joe Carberry Mark W. Riepe, CFA® Sara Smith
I L LU S T R AT I O N S B Y M I G U E L P O R L A N
Senior Vice President, Senior Vice President, Editor in Chief
Communications & Schwab Center for
Owned-Channel Marketing Financial Research Jeremy Hartley
and Community Managing Editor
Tamar Dorsey
Helen Loh Vice President, Stacia Miller
Senior Vice President, Brand Journalism Associate Managing
Retail Client & Editor
Owned-Channel Marketing
2 | C H A R L E S S C H WA B | FA L L 2020
CEO’s NOTE
Come
his year has eclipsed even the n If you’re looking for market com-
T Great Recession in terms of the mentary, schwab.com/insights now
What May
personal and financial hardship so offers a curated selection of timely
many families have had to endure. All analyses from Schwab experts as well
of us have been impacted by COVID-19 as time-honored investing strategies
Whatever the circumstances, in one way or another. for when markets turn volatile.
we’re here to help. In these uncertain times, we at n If you have questions about your
Schwab are here to support you in any account or how to use various
way we can. That’s why we’ve been Schwab services, our new schwab.com/
rolling out resources to help make FAQs provides quick answers.
sense of the current environment and n And, of course, you can reach us
keep your finances on track: 24/7 at 800-435-4000 with any ques-
tions or concerns.
We’ve been
rolling out At the same time, we’ve taken a
resources to number of measures to safeguard the
health and well-being of our employ-
help keep ees so they can stay safe and care for
your finances their families while also continuing to
on track. serve you.
Although the current crisis is
unprecedented, this is not our first
downturn, nor is it likely to be our last.
But that doesn’t make us any less opti-
mistic about the future. We still believe
in the power of investing—and look
forward to helping you achieve your
goals, come what may.
Sincerely,
Walt Bettinger
President & CEO
See page 38
for important
information.
(0820-0NLM)
FA L L 2020 | ON INVESTING | 3
Schwab offers hundreds
of ways to make an
impact through socially
responsible investing.
Socially responsible investing (SRI) helps you choose investments based on
environmental, social, or ethical factors. Schwab’s research tools make it
easy to choose from over 500 SRI mutual funds and over 80 SRI ETFs.
Plus, if you are looking for more personal guidance, you have the option to
work with a Schwab Financial Consultant who can help you make the most
of SRI at Schwab.
Learn more at schwab.com/SRI.
Investors should consider carefully information contained in the prospectus or, if available, the
summary prospectus, including investment objectives, risks, charges, and expenses. Please read it
carefully before investing.
Investing involves risk, including loss of principal.
Please note that there are certain requirements for working with a dedicated Financial Consultant.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.
Charles Schwab & Co., Inc., 211 Main Street, San Francisco, CA 94105
©2020 Charles Schwab & Co., Inc., All rights reserved. Member SIPC.
(0920-05AP) ADP111541-00 (08/20) 00247789
CONTENTS PORTFOLIO MANAGEMENT | TAXES | SOCIALLY RESPONSIBLE INVESTING | AND MORE
The Law of
fter months of fast drops and your long-term investments. “Those
A sudden rises in the market this deep valleys don’t look quite so scary
Averages
I L LU S T R AT I O N B Y J O S I E P O R T I L LO
year, investors may have all but forgot- if you’re able to zoom out from the
ten 2019’s record runup of nearly 30%. day-to-day and see the big picture,”
But recency bias—or the tendency to says Mark Riepe, head of the Schwab
How outsize gains plus believe something is more likely to Center for Financial Research.
outsize losses can add up to happen again because it happened The fact is, the S&P 500 returned
long-term success. recently—highlights the need to look an average of about 10.2% annually
beyond the present when it comes to from its inception in 1926 through
FA L L 2020 | ON INVESTING | 5
T H E B OT TO M L I N E
2019 (see “The bigger picture,” below). accounts. “You shouldn’t focus on that your financial situation hasn’t funda-
In other words, even the market’s money every single day,” Mark says. mentally changed,” Mark says. “If it has,
darkest days—including three Black “At best, you’ll drive yourself crazy. At revisit your financial plan.”
Mondays (10/28/1929, 10/19/1987, and worst, you’ll be tempted to sell when As for external events, remember
08/24/2015) and numerous other mar- markets turn against you.” that, good or bad, this too shall pass.
ket corrections—couldn’t knock the Of course, you shouldn’t completely “Just as you shouldn’t make plans based
index off its long-term march upward. ignore your investments, either. “Review on the good times lasting forever,”
If you have a hard time stomaching your statements and adjust your hold- Mark says, “neither should you make
volatility, Mark’s advice is to limit ings as necessary in order to maintain plans assuming the bad times will last
how often you check your long-term your target asset allocation—assuming forever—because they won’t.”
The bigger picture
Despite nearly a century of extreme peaks and valleys, the S&P 500 has averaged an annual return of 10.2% since its inception.
60%
Average annual return: 10.2%
50%
40%
30%
20%
S&P 500 annual returns
10%
0%
–10%
–20%
–30%
–40%
–50%
1926
1928
1930
1932
1934
1936
1938
1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Source: Schwab Center for Financial Research. Data from 1926 through 2019. Note: Annual returns from 1926 through 1970 are represented by the
Ibbotson U.S. Large Stock Index, which comprised the same components as the S&P 500 and its predecessor indexes.
NEXT See page 38 for important information. ◆ Please read the Schwab Intelligent Portfolios Solutions™
STEPS disclosure brochures for important information, pricing, and disclosures related to the Schwab Intelligent
Portfolios and Schwab Intelligent Portfolios Premium programs. Schwab Intelligent Portfolios® and Schwab
Intelligent Portfolios Premium™ are made available through Charles Schwab & Co., Inc. (“Schwab”), a dually
Investing with a robo-advisor can help registered investment advisor and broker dealer. ◆ Portfolio management services are provided by Charles
keep your emotions in check. Learn Schwab Investment Advisory, Inc. (“CSIA”). Schwab and CSIA are subsidiaries of The Charles Schwab
more about Schwab’s robo-advisor, Corporation. ◆ Past performance is no guarantee of future results and the opinions presented cannot be
viewed as an indicator of future performance. ◆ Investing involves risk, including loss of principal.
Schwab Intelligent Portfolios®, at ◆ Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in
schwab.com/intelligent. directly. For more information on indexes please see schwab.com/indexdefinitions. (0820-0G4K)
6 | C H A R L E S S C H WA B | FA L L 2020
Tax
Withholding
in Retirement
How to help ensure you
prepay enough taxes once
you’re no longer working.
uring your working years, you
D typically have one primary
source of income: your paycheck. “In
retirement, however, your income
will likely be drawn from multiple
sources—and the tax withholding
rules for each may vary,” says Hayden
Adams, CPA, CFP®, and director of tax
planning at the Schwab Center for
Financial Research.
Here’s how federal tax withholding
generally works for some common
sources of retirement income (state
withholding may also apply): are treated as wages using the IRS If you’re unsure how much you
withholding tables in Publication 15 should have withheld each year, you
n Traditional, SEP, and SIMPLE (see irs.gov/pub/irs-pdf/p15.pdf ). You can use the IRS’ Tax Withholding
IRAs: Unless you specify otherwise, can set up or change your withholding Estimator (see irs.gov/individuals/
your plan’s custodian will with- by submitting Form W-4P to the payer. tax-withholding-estimator) to calcu-
hold 10% on taxable distributions. n Social Security: Withholding isn’t late your overall tax obligation.
Generally speaking, you can change required on Social Security payments, “That said, your estimated tax obli-
or eliminate your withholding at but a portion of your benefits may be gation is just that—an estimate—and
any time by reaching out to your taxable, depending on your income. will not account for any fluctuations in
individual retirement account (IRA) Visit ssa.gov/planners/taxes.html to income throughout the year,” Hayden
custodian. see how benefits are taxed. You can says. As a result, it’s wise to work with
n 401(k), 403(b), and other qualified set up or change your withholding by a tax professional. He or she may even
workplace retirement plans: Plan submitting Form W-4V to the Social recommend you make quarterly esti-
providers typically withhold 20% Security Administration. mated tax payments in addition to the
on taxable distributions—unless n Taxable bank or brokerage amounts already being withheld. “That
the withdrawal is made to satisfy accounts: In most instances, taxes way, you won’t end up underpaying
the annual required minimum are not withheld from capital gains, the IRS throughout the year, which
distributions (RMDs) mandated distributions, or other income gener- could result in penalties,” Hayden says.
by the IRS, which conform to IRA ated from such accounts.2 However, 1
Under the Coronavirus Aid, Relief, and Eco-
withholding rules. 1 you may want to withhold more nomic Security Act, RMDs have been waived
for 2020. | 2Certain taxpayers may be subject to
n Annuities and pensions: Taxable elsewhere or pay quarterly estimated backup withholding, which requires a payer
to withhold tax from payments not otherwise
I L LU S T R AT I O N B Y J O S I E P O R T I L LO
periodic (e.g., weekly or monthly) taxes to help cover any tax liabilities
subject to withholding. Learn more at irs.gov/
NEXT payments from annuities and pensions produced by these assets. taxtopics/tc307.
STEPS
Learn how Schwab can help you generate income See page 38 for important information. ◆ This information does not constitute and is not
intended to be a substitute for specific individualized tax, legal, or investment planning advice.
and make tax-smart withdrawals in retirement at Where specific advice is necessary or appropriate, Schwab recommends consultation with a
schwab.com/retirementincome. qualified tax advisor, CPA, financial planner, or investment manager. (0520-0GJR)
FA L L 2020 | ON INVESTING | 7
T H E B OT TO M L I N E
SRI and Your 401(k)
market, they may offer less diversifi-
cation than, say, a broad-based index
mutual fund or exchange-traded fund
What to know before adding socially responsible investments (ETF). For example, the VanEck Vectors
to your retirement portfolio. Environmental Services ETF—which
invests at least 80% of its assets in the
nly about 3% of 401(k) plans Here are four questions to consider stocks of companies involved in the
O currently offer SRI funds 1— when selecting SRI funds for your environmental services industry—
which use environmental, social, and retirement portfolio. allocates a whopping 41.67% to its
governance (ESG) criteria to guide their top five holdings.3 “At such high con-
investment decisions—but that figure 1 What’s its focus? Some funds centrations, a single stock could have
may rise as investors push for funds broadly integrate ESG criteria into undue influence on the performance
that both align with their values and their investing practices or focus on of your portfolio,” Michael cautions. “If
deliver competitive returns. Indeed, companies that aim to solve specific that concerns you, look for funds with
one survey found that 56% of plan environmental or social issues, lower allocations to any one company.”
participants prefer investing in socially whereas others exclude certain kinds
responsible companies.2 of companies—such as those that sell 4 What’s its annual fee? Every dollar
“If investing with your values is tobacco products. you pay in fees is one you can’t invest
important to you, SRI funds are a great for future growth—and that’s doubly
way to go—provided they fit your 2 Does it have a solid track record? important when it comes to your
goals,” says Michael Iachini, vice presi- “Generally speaking, you want to see retirement savings. “Some SRI funds
dent and head of manager research at a track record of at least three years to charge astronomical fees while others
Charles Schwab Investment Advisory. ensure the fund’s strategy is sound and are more on par with low-cost index
“For example, retirement plans that not just a flash in the pan,” Michael says. funds,” Michael says. “Be sure you know
offer SRI funds typically have only one what you’re paying before you invest.”
option, and that option may or may 3 Is it diversified? Because SRI funds
not be the best fund for you.” tend to focus on a narrower slice of the If your workplace retirement plan
offers limited SRI choices—or none
at all—consider investing through an
Growing good individual retirement account, which
In 2018, $11.6 trillion in assets were managed using ESG criteria in the U.S. typically provides access to the same
alone—a 43% increase over 2016.
investment options as a traditional
Assets under management brokerage account.
2018 1
Ron Lieber, “How to Get Socially Conscious
Funds Into Your 401(k),” nytimes.com,
$11.6 trillion 01/10/2020. | 2The Cerulli Edge—U.S. Retirement
+43% Edition, Trends to Watch in 2019, Q1 2019. |
3
Schwab.com, as of 05/22/2020.
2016
$8.1 trillion See page 38 for important information.
◆ Investors should consider carefully
information contained in the prospectus, or if
available, the summary prospectus, including
investment objectives, risks, charges, and
expenses. You can obtain a prospectus by
calling Schwab at 800-435-4000. Please read
it carefully before investing. ◆ The information
provided here is for general informational
purposes only and should not be considered
an individualized recommendation or
personalized investment advice. The
investment strategies mentioned here may
not be suitable for everyone. Each investor
I L LU S T R AT I O N S B Y J O S I E P O R T I L LO
needs to review an investment strategy for
his or her own particular situation before
Source: Report on US Sustainable, Responsible and Impact Investing Trends, US SIF, 2018.
making any investment decision. ◆ Investing
involves risk, including loss of principal.
To research SRI mutual funds for your portfolio, log in to schwab.com/ ◆ Socially screened funds exclude certain
NEXT investments and therefore may not be able to
fundscreener and select Socially Conscious under the Basic Criteria
STEPS take advantage of the same opportunities or
dropdown. To research SRI ETFs, log in to schwab.com/ETFscreener and market trends as funds that do not use social
select Socially Conscious under the Portfolio dropdown. screens.(0520-0PUR)
8 | C H A R L E S S C H WA B | FA L L 2020Shopping for
“Too many brokerages not only etc.—which, as with the markup, they
charge far too much but also conceal may or may not be required to disclose.
Bonds
such costs from investors,” Kathy says.
So, before you buy your next bond, 4 What’s the accrued interest? When
ask your broker these important ques- you buy a bond between coupon pay-
You comparison shop for tions—and be sure you’re satisfied with ment dates, you’ll owe the seller any
most everything else—so the answers. accrued interest since the last payment
why not for bonds? date. This cost has nothing to do with
1 What’s the market price? This will your broker but does factor into the
ould you ever buy a car—or reflect the actual price it costs your total cost.
W even a new pair of shoes—with- broker to buy a bond from another
out looking for the best deal? Probably dealer (which may include fees paid to 5 What’s the overall cost? This will
not. So why don’t more investors the dealer). include all of the above: the market
comparison shop for bonds? price, plus any markup, additional fees,
“Many investors simply don’t realize 2 What’s the markup? Markups refer and accrued interest.
different firms charge different prices to the difference between the market
for the exact same bond,” says Kathy price of a bond and the price a broker- “Be wary of firms that fail to give you
Jones, senior vice president and chief dealer charges to sell it. Markups are direct answers about their fees,” Kathy
fixed income strategist at the Schwab generally wrapped into the price—and says. “They’re probably being opaque
Center for Financial Research. may or may not be disclosed. (For more for a reason.”
The problem stems from the fact on Schwab’s fixed income pricing, visit Indeed, even seemingly small differ-
that bonds don’t trade on centralized schwab.com/fixed-income-pricing.) ences in markups can mean giving up
markets like stocks, which makes hundreds, if not thousands, of dollars
their true cost difficult, if not impos- 3 Are there additional fees? In addi- in total returns over time. And with
sible, to ascertain. Instead, most are tion to markups, brokers may charge prices and yields fluctuating to the
purchased “over the counter” through miscellaneous fees to cover adminis- degree they have recently, it pays to
a brokerage firm that buys a bond on trative services, clearing fees, overhead, shop around.
your behalf—and tacks on a fee, or
markup, that can range from a fraction See page 38 for important information. ◆ Fixed income securities are subject to increased loss of
principal during periods of rising interest rates. Fixed income investments are subject to various
of a percent to several percentage
other risks, including changes in credit quality, market valuations, liquidity, prepayments, early
points, depending on factors such as redemption, corporate events, tax ramifications, and other factors. Lower-rated securities are
bond liquidity and the firm executing subject to greater credit risk, default risk, and liquidity risk. ◆ In the bond market, there is no
NEXT centralized exchange or quotation service for most fixed income securities. Prices in the secondary
the trade. market generally reflect activity by market participants or dealers linked to various trading systems.
STEPS Bonds available through Schwab may be available through other dealers at superior or inferior
prices compared to those available at Schwab. All prices are subject to change without prior notice.
◆ Schwab reserves the right to act as principal on any fixed income transaction, public offering, or
Schwab BondSource® gives you access to a broad securities transaction. When Schwab acts as principal, the bond price includes our transaction fee
selection of bonds, including new-issue municipal and may also include a markup that reflects the bid-ask spread and is not subject to a minimum or
and corporate bonds, at the best price available maximum. When trading as principal, Schwab may also be holding the security in its own account
prior to selling it to you and, therefore, may make (or lose) money depending on whether the
to Schwab. Log in to schwab.com/bondsource to price of the security has risen or fallen while Schwab has held it. When Schwab acts as agent, a
get started. commission will be charged on the transaction. (0820-06TJ)
FA L L 2020 | ON INVESTING | 9Be a
true-blue
friend.
Refer your friends and family,
and they can get up to $500.
Friends and family earn a Bonus Award
when they make a qualifying net deposit
of cash or securities.
Net Deposit Bonus Award
$1,000–$24,999 $100
Visit schwab.com/refer
$25,000–$49,999 $200
or call 800-398-8640 for details.
$50,000–$99,999 $300
$100,000+ $500
Brokerage Products: Not FDIC-Insured • No Bank Guarantee • May Lose Value
New-to-firm clients who are referred, open an eligible account, enroll in the offer, and make a qualifying net deposit of
$1,000–$100,000+ within 45 days can earn a Bonus Award of $100–$500. Schwab may change the terms or terminate
this offer at any time. See schwab.com/refer for details.
While we greatly appreciate all client business, we are unable to accept referrals from clients
who hold only a PCRA or CRA with Schwab.
©2020 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.
CC4260847 (0820-049K) ADP110412-01 (06/20) 00247391
ADP110412-01.indd 1 6/23/20 8:54 AMB Y CAR R I E SCHWAB - POM E RANT Z
Q A
Social
Dear Carrie, Dear Reader,
Security for I’m 62, my wife is 53, and we have I’m glad you raised this question because
Families 14-year-old twins. My income has
it touches on a widely misunderstood
component of the Social Security
dropped precipitously, and I’m system: family benefits. Unlike survivor
looking for a way to fill in the gap. benefits—which are paid to eligible
The benefit begins beneficiaries upon your passing—fam-
with you—but it Could applying now for Social ily benefits are paid to eligible family
doesn’t end there. Security benefits make sense? members during your lifetime. Even
I L LU S T R AT I O N B Y S H O U T
FA L L 2020 | ON INVESTING | 11A S K CA R R I E
better, family benefits don’t eat into Patience pays
your benefit; on the contrary, they
The longer your spouse waits to collect either 50% of your benefit or 100% of
can significantly boost your family’s her own, the bigger her benefit will be.
total payout.
Full retirement age
While it generally makes the most
$1,200
Monthly benefit amount
sense to delay claiming Social Security Wife’s spousal benefit
$1,000
benefits if you can afford to wait and are Wife’s personal benefit
in good health, family benefits can make $900 $800
claiming early an attractive option. That
said, the rules regarding family benefits $400
are complex—but understanding the
basics can help you and your family $0
capture all available benefits. 62 63 64 65 66 67 68 69 70
Age at which she begins collecting
Who’s eligible—and when Source: Social Security Administration. The example is hypothetical and provided for illustrative
First things first: You have to file for purposes only. Assumes a PIA of $2,000 for the higher-earning spouse and a PIA of $900 for his wife
based on her own work record. Note: Unlike benefits earned against an individual’s own work
your own benefit before your family record, spousal benefits do not increase past full retirement age. Figures are in today’s dollars and
members can collect against it. From assume no future increases in prices or earnings.
there, your family members can col-
lect against your Primary Insurance PIA until your twins turn 16. At that Security Statement, available at ssa.gov/
Amount (PIA)—or what your Social point, her benefit would stop. myaccount/statement.html, can tell you
Security benefit would be at full If your wife is eligible for her own how much you and your family would
retirement age (between 66 and 67 for Social Security benefit and waits until receive, or you can call the Social Security
today’s retirees)—provided they fall her full retirement age, she would Administration at 800-772-1213. You
into one of three categories: receive either 100% of her benefit or can also call 800-355-2162 to talk to a
50% of yours—whichever is larger. If Schwab financial consultant about
Spouses age 62 or older, who can she claims either her or your Social how Social Security fits into your
collect from 32.5% to 50% of your PIA Security benefit before her full financial plan. n
based on when they file (see “Patience retirement age, her benefit would
pays,” above right). be reduced accordingly (again, see
“Patience pays,” above).
Spouses of any age, who can collect What about ex-spouses?
50% of your PIA, provided you’ve been Maximum family benefit An ex-spouse who was married to you
married at least one year and have a While the numbers may look good so for at least 10 years, is 62 or older,
child under the age of 16 (or a child of far, there’s a limit on the total benefit and is currently unmarried is also
any age in your care who was disabled your family can collect. This family eligible to collect up to 50% of what
before age 22). maximum benefit is between 150% your Social Security benefit would be
and 188% of the primary earner’s PIA at full retirement age. Rest assured,
Children—including adopted, (the Social Security Administration however, that your ex-spouse’s
biological, and stepchildren, as well uses a complex formula to determine payouts have absolutely no impact on
as grandchildren for whom you’re the the final amount). your—or your family’s—benefits.
legal guardian—who can collect 50% If the sum of your benefit and your
of either parent’s PIA, provided they’re family’s benefits exceeds this amount,
unmarried and: their payments—though not yours—
Carrie Schwab-Pomerantz
• Younger than 18. would be uniformly reduced to meet (@carrieschwab), CFP®, is president of
• Younger than 19 and a full-time the cap. For example, if the benefit for Charles Schwab Foundation and senior vice
president of Schwab Community Services
K–12 student. your wife and your twins exceeds the at Charles Schwab & Co., Inc.
• Any age, if disabled before age 22. maximum by $1,200, each of their
See page 38 for important information.
monthly payments would be cut ◆ The information provided here is for
So, assuming you filed for Social by $400, while yours would remain general informational purposes only and
Security at age 62, your spouse at age 53 the same. should not be considered an individualized
recommendation or personalized investment
NEXT would be eligible to receive 50% of your advice. The investment strategies mentioned
STEPS Next steps here may not be suitable for everyone. Each
As you can see, the family benefit rules investor needs to review an investment
strategy for his or her own particular
Read more insights about Social Security at within Social Security are complex situation before making any investment
schwab.com/socialsecurity. but worth understanding. Your Social decision. (0820-0L8J)
12 | C H A R L E S S C H WA B | FA L L 2020CONTENTS FINANCIAL PLANNING | TARGET-DATE FUNDS | TAX-LOSS HARVESTING
You’ll Be Back
What investors can do
to rebuild their finances.
By Rob Williams
he market sell-off triggered by
T COVID-19 may have shaken your
confidence and taken at least a near-
term toll on your finances. But times of
uncertainty are also an opportunity to
reevaluate your priorities.
In fact, research has shown that spe-
cific events—the start of a new year, for
example, or the conclusion of a crisis—
can be a powerful catalyst for change.1
If you’re ready to make a fresh start
with your finances, here are five
steps to get the ball rolling.
Step 1: Take stock
You can’t make meaningful
financial change unless you
know where you stand:
Calculate your net
worth: Make a list of all
your assets and subtract
your debts (or use a
wealth-tracking app). This
is the benchmark against
which you can measure
future progress. And don’t
panic if your net worth declines away that money in a separate savings contributions from your employer,
during tough market periods—what’s account so you’re less likely to tap it for starting in your 20s. If you started
important is the long-term trend. other expenses. saving later than that, add 10% for
See where your money is going: every decade you delayed. And if your
After calculating your after-tax income, Step 2: Shore up your savings current budget won’t support your
list your current expenses and decide Once you have a big-picture view of target savings rate, free up some cash
P H OTO G R A P H B Y DA N WO N D E R LY
which are essential (such as housing your finances, you should then make by eliminating nonessential expenses.
and retirement savings) and which sure your savings are on track: Account for emergencies: Establish
are nonessential (such as subscription an emergency fund with three to
services and ordering takeout). If you Prioritize retirement: A rule of six months’ worth of essential living
have a big expense coming up—like thumb is to save 10% to 15% of your expenses in a highly liquid checking,
college tuition or a roof repair—sock pretax income, including any matching savings, or money market account
FA L L 2020 | ON INVESTING | 13P E R S P E CT I V E S | FINANCIAL PLANNING
to help cover unexpected expenses volatility risk by spreading your wealth assets are distributed in a way that’s
without having to sell more-volatile across myriad assets. Mutual funds and consistent with your will and other
investments. exchange-traded funds (ETFs) offer a estate-planning documents.
diversified basket of securities in just Coordinate asset titling with the rest
Step 3: Manage your debt about any asset class. of your estate plan: When assets are
For many people, some level of debt is Consider taxes: Place relatively titled jointly with rights of survivor-
a practical necessity—especially when tax-efficient investments (such as ETFs, ship, they are not subject to probate
purchasing pricey assets such as a car index funds, and municipal bonds) in and can pass directly to the surviving
or home. Here’s how to manage it your taxable brokerage accounts, and owner without delay. However, if
effectively: relatively tax-inefficient investments the joint owner is not a spouse, he or
(such as actively managed mutual she could face unexpected tax conse-
Eliminate high-cost debt: The cost funds and real estate investment trusts, quences. Be sure to work with an estate
of credit card debt adds up quickly if or REITs) in your tax-advantaged retire- attorney, who can advise you on such
you carry a balance, so focus on bring- ment accounts. matters and ensure all titling adheres
ing that down to zero—and keeping it Review and rebalance as needed: to state law.
that way. Market ups and downs can have a Name durable powers of attorney
Consolidate balances: If you own significant impact on the balance of for your health care and finances:
your home, consider establishing a stocks, bonds, and other assets in your Appoint trusted and competent confi-
home equity line of credit (HELOC) portfolio. Check your holdings at least dants to make decisions on your behalf
to consolidate other types of debt quarterly and rebalance as needed to should you become incapacitated, and
at a potentially lower interest rate. ensure you’re still investing according make sure they know the location of
A HELOC can also serve as backup to your goals and timeline. important estate documents.
emergency savings. Double-check your insurance
Watch your total debt load: Don’t Step 5: Protect your assets, coverage: This includes your property,
confuse what you can borrow with dependents, and estate casualty, auto, health care, disability,
what you should borrow. Try to follow Your estate plan is a way for you to and, most important, any life insur-
the 28/36 rule: Ideally, no more than support the people and things you ance policies—which are invaluable if
28% of your pretax income should care about most. Enlist a lawyer or you have dependents, debts, or family
go toward your mortgage, and no estate-planning attorney to help you: needs that would be unfunded if you
more than 36% of your pretax income passed away.
should go toward all debt. Update your will and beneficiaries:
A will is crucial to providing for your Take control
Step 4: Optimize your dependents’ support and care. And We can’t control what’s happening
portfolio reviewing beneficiaries ensures that the in the world, but we can take steps to
Create an investment plan that will proceeds from annuities, life insurance bring some order to our own affairs.
help you stay disciplined in all kinds policies, retirement accounts, and other And having a plan with realistic goals
of markets: will go a long way toward making you
feel more confident about your ability
Focus on your overall investment to respond to any surprises that the
mix: Have a targeted asset allocation Rob Williams is vice markets or life throws your way. n
president of financial
that’s in sync with your long-term planning at the
goals, risk tolerance, and time frame. Schwab Center for 1
Hengchen Dai, Katherine L. Milkman, and
Financial Research. Jason Riis, “The Fresh Start Effect: Temporal
The longer your time horizon, the Landmarks Motivate Aspirational Behavior,”
more opportunity you’ll have to ride Management Science, 06/23/2014.
out a down market. (For more, see
“Reassessing Risk,” page 22.)
See page 38 for important information. u Please read the Schwab Intelligent Portfolios
Diversify across and within asset Solutions™ disclosure brochures for important information, pricing, and disclosures related to
classes: Diversification helps reduce the Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs. Schwab
Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ are made available through
LET’S Charles Schwab & Co., Inc. (“Schwab”), a dually registered investment advisor and broker dealer.
TALK u Portfolio management services are provided by Charles Schwab Investment Advisory, Inc.
(“CSIA”). Schwab and CSIA are subsidiaries of The Charles Schwab Corporation. u Diversification
and rebalancing a portfolio cannot ensure a profit or protect against a loss in any given market
Need help getting your financial affairs in order? environment. Rebalancing may cause investors to incur transaction costs and, when a non-
Work one-on-one with a CERTIFIED FINANCIAL retirement account is rebalanced, taxable events may be created that may affect your tax
PLANNER™ professional when you enroll in Schwab liability. u This information does not constitute and is not intended to be a substitute for specific
individualized tax, legal, or investment planning advice. Where specific advice is necessary or
Intelligent Portfolios Premium™. Learn more appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner,
at schwab.com/portfoliospremium. or investment manager. u Investing involves risk, including loss of principal. (0820-0MZN)
14 | C H A R L E S S C H WA B | FA L L 2020The benefits
you’ve come to
expect, without
the fees.
The checking account built with you in mind.
You expect the full package from a checking account—no monthly fees, convenience, and
features to keep your account safe. Well, with the Schwab Bank High Yield Investor Checking®
account1 linked to a Schwab One® brokerage account, you get all of that and more, including:
■ No monthly account service fees and unlimited ATM fee rebates2
■ Access to mobile wallets to pay with ease3
■ Bank alerts and card lock/unlock to keep your account safer
Add a High Yield Investor Checking account today.
Learn more at schwab.com/checking or call 866-215-1863.
1
The Schwab Bank High Yield Investor Checking ® account is available only as a linked account with a Schwab One ® brokerage account. The Schwab One
brokerage account has no minimum balance requirements, minimum balance charges, minimum trade requirements, and there is no requirement to fund this
account, when opened with a linked High Yield Investor Checking account.
2
Unlimited ATM surcharge rebates apply to cash withdrawals using the Schwab Bank Visa® Platinum Debit Card wherever it is accepted. ATM surcharge rebates do
not apply to any fees other than surcharges assessed for using an ATM to withdraw cash in local currency from your Schwab Bank account. Schwab Bank makes
its best effort to identify those ATM surcharges eligible for rebate, based on information it receives from Visa and ATM operators. In the event that you have not
received a rebate for an eligible surcharge, please call a Schwab Bank Client Service Specialist for assistance at 888-403-9000 (or for clients of independent
investment advisors, a Schwab Alliance Service team member at 800-515-2157). Schwab Bank reserves the right to modify or discontinue the ATM surcharge
rebate at any time.
3
Use of your card through a mobile wallet is also subject to the terms and conditions of your Schwab Bank Deposit Account Agreement (which contains information
on any potential liability for unauthorized transactions), your Visa Debit Card Agreement, the terms and conditions of the mobile wallet you use, the privacy policy
set forth at Schwab.com, and the privacy policy of the mobile wallet you use.
Charles Schwab Bank, SSB and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Brokerage
products, including the Schwab One ® brokerage account, offered by Charles Schwab & Co., Inc. (Member SIPC) are not insured by the FDIC, are not deposits or
obligations of Charles Schwab Bank, SSB and are subject to investment risk, including the possible loss of principal invested. Deposit and other lending products,
including the High Yield Investor Checking account, are offered by Charles Schwab Bank, SSB, Member FDIC and Equal Housing Lender.
Brokerage Products: Not FDIC-Insured • No Bank Guarantee • May Lose Value
©2020 Charles Schwab Bank, SSB. All rights reserved. Member FDIC. CC4197431 (0820-0MW7) ADP111277OI-00 (06/20) 00246719
162791_2020_Q3_OI_ADP111277OI-00_BANK_HYIC.indd 1 6/12/20 12:49 PMP E R S P E CT I V E S | TA R G E T- DAT E F U N D S TA X- LO S S H A R V E S T I N G
Dream Date Lost and
Look under the hood to include, can have net expense ratios Is “to” or “through” right for you?
above 2%. Data from Morningstar
All target-date funds grow more conservative over time. However, “to” funds
Found
Despite their relative simplicity, shows that lower-fee funds have proven reach their most conservative allocation at their target date, while
How to choose the right target-date funds can vary widely in more popular in recent years. However, “through” funds continue to adjust their allocations well beyond that date.
target-date fund for you. their asset allocation, management actively managed funds may be more
By Michael Iachini approach, and more. When comparing responsive to market fluctuations.2 “To” glide path “Through” glide path ← Target date How to use investment
funds, pay particular attention to:
100%
losses to your advantage.
arget-date funds have become n To view a breakdown of a fund’s By Hayden Adams
T a staple of many 401(k)s and n Fees: All target-date funds generally fees, log in to schwab.com/research- 80%
Allocation to stocks
individual retirement accounts involve some degree of human judg- tools, input its ticker symbol, and hether the result of a market
(IRAs). According to BrightScope, ment in the selection of investments, click the Fund Facts & Fees tab. 60%
W downturn or just lackluster
21% of all assets in 401(k) plans were but some are more actively managed performance, losses in our portfolios
in target-date funds in 2016—up n Glide path: This is the term for how 40% are something we all experience.
from 3% just a decade earlier. More a fund’s asset allocations change over Fortunately, losing investments can have
broadly, total assets under management time. For example, some target-date 20% a silver lining: Through so-called tax-loss
in target-date funds increased from funds move heavily into bonds and harvesting, you may be able to use them
0%
roughly $7 billion in 2000 to nearly cash before the fund’s target date, 40 30 20 10 +10 +20 +30
to lower your tax liability and better
$1.4 trillion in 2018.1 while others continue to hold siz- position your portfolio going forward.
Years to target date
The appeal is understandable: able stock allocations well after Here are four situations in which
Target-date, or age-based, that date (see “Is ‘to’ or ‘through’ The examples are hypothetical and for illustrative purposes only. it might make sense to ditch your
funds offer an all-in-one mix right for you?” above right). losers—and what to consider if you
of stocks, bonds, and cash Different funds may also have same series. Conversely, if it’s too approach, in which most of your retire- plan to reinvest the proceeds.
that grows steadily more different allocation models. aggressive, try a fund with an earlier ment portfolio remains in a target-date
conservative over time, For example, the stock date, such as 2020 or 2025. fund, with a portion left over for other 1 You want to realize
with some funds reaching allocations among the half- investments you can manage yourself. some gains
their most conservative dozen largest funds with a n To review a fund’s glide path, log If you decide to pursue this approach, When people talk about the benefits
mix at their target date target date in 2020 range in to schwab.com/research-tools, take a holistic view of all your invest- of tax-loss harvesting, it’s often in the
and others downshifting from 33% to 55%, according input its ticker symbol, and click the ments to ensure they’re complemen- context of offsetting gains. Even though
their asset mix more to Morningstar.3 Prospectus link. tary and collectively in line with your the market has had a turbulent year,
gradually. Their set-it- Compare different target asset allocation. you may still have some bright spots
and-forget-it style makes allocation strategies before n Holdings: While some funds stick to In short, target-date funds offer a in your portfolio. If you’re looking to
them an attractive settling on one that matches a basic mix of stocks, bonds, and cash, simple, one-stop solution for many lock in those gains, selling some of your
option for people who your own appetite for others incorporate investments like retirees. Simple, however, doesn’t losers can help minimize your capital
don’t want to be actively returns and risk. In particu- commodities and real estate investment always mean easy. You’ll still need to do gains taxes (see “Using a tax loss to get
involved in picking assets lar, look at a fund’s asset mix trusts (REITs). In general, broader is bet- your homework to find the right fund a tax break,” next page).
or adjusting their alloca- at your current age, at your ter. That’s because the more asset types for you—and to stay on top of your
tion over time. anticipated retirement age, you have, the less likely they’ll all move overall progress toward your goals. n 2 You want to reduce your
Of course, this approach and at 10 years past your antic- in the same direction at the same time, taxable income
may not be right for all ipated retirement age. If your which can help mitigate your losses 1
Charles Schwab Investment Advisory, Inc. Data If you don’t have investment gains
from 12/31/2000 through 12/31/2018. | 2Jeff
investors. If you’re disci- main concern is outliving your sav- during a downturn. That said, Schwab Holt, “A Brief Overview of How the Target-Date
to offset, or if you realize more losses
plined about rebalancing your ings, you may be happier with a fund recommends that even the most aggres- Fund Landscape is Evolving,” morningstar.com, than gains, you can use up to $3,000 in
05/09/2019. | 3Randall Smith, “What the Market
portfolio each year and confident that maintains a higher allocation to sive investor’s portfolio contain a total Selloff Revealed About Target-Date Funds,” losses to reduce your ordinary income
in your ability to maintain an than others. Those made up primarily stocks at and beyond the target date. If of no more than 10% commodities, wsj.com, 04/05/2020. this year and every year thereafter until
appropriately diverse portfolio, of index funds, for example, may offer your main concern is protecting your P H OTO I L L U S T R AT I O N B Y 30 P O I N T; G E T T Y I M AG E S / I S TO C K P H OTO REITs, and other so-called real assets. the entire loss is accounted for.
for example, subcontracting out net expense ratios as low as fractions of principal, you may want a fund that See page 38 for important information. u
your investment decisions may a percentage point. Actively managed maintains relatively little allocation n To review a fund’s holdings and
Investors should consider carefully information 3 You need the income
contained in the prospectus or, if available, the
feel unsatisfying. funds, which have professionals making to stocks at and through retirement. overall portfolio composition, log in to summary prospectus, including investment There’s an adage among traders: Let
Even when a more-automated, more judgment calls about which assets Finally, if the target-date funds schwab.com/research-tools, input its objectives, risks, charges, and expenses. your winners run. Thus, if you don’t
Please read it carefully before investing. u
hands-off approach is called for, available in your employer’s 401(k) are ticker symbol, and click the Portfolio
The information provided here is for general
there are important considerations in too conservative or too aggressive for and Holdings tabs. informational purposes only and should not be
choosing a fund that’s right for you. your tastes, consider a fund that’s dated considered an individualized recommendation
Michael Iachini, CFA®, or personalized investment advice. The Hayden Adams, CPA,
NEXT CFP®, is vice president, after or before your planned retirement “Core and explore” investment strategies mentioned here may not CFP®, is director of tax
STEPS head of manager date. For instance, if you’re planning to be suitable for everyone. Each investor needs and financial planning
research at Charles to review an investment strategy for his or her at the Schwab Center
retire in 2030 but the available target Alternatively, if you prefer to keep a for Financial Research.
Schwab Investment own particular situation before making any
See how Schwab Target Date Funds work hard for Advisory, Inc. 2030 fund is too conservative for you, hand in overseeing your investments, investment decision. u Investing involves risk,
your retirement at schwab.com/targetfunds. look at the 2035 or 2040 fund in the consider a so-called core-and-explore including loss of principal. (0820-0XLR)
16 | C H A R L E S S C H WA B | FA L L 2020 FA L L 2020 | ON INVESTING | 17P E R S P E CT I V E S | TA X- LO S S H A R V E S T I N G
want to sell your winners prematurely, page 26). That said, it can be hard Other considerations
it might make more sense to generate to let go of an investment that’s lost If you’ve decided to sell some losers,
the necessary income by selling your value thanks to the break-even fal- it’s important to understand a few of
losers—which may allow you to offset lacy, or our instinct to wait to sell an the applicable tax rules before you
up to $3,000 a year in ordinary income investment until it rebounds to our take action:
in the process. purchase price.
But holding on to the investment in n Short- vs. long-term capital gains:
4 The investment no longer hopes of a turnaround could further Short-term capital gains are taxed
fits your strategy erode your returns, whereas taking the at ordinary federal income tax rates,
Regardless of whether an investment loss could allow you to get your port- which for many taxpayers are higher
has lost or gained value, you should folio back on track more quickly—and than the long-term capital gains rates
never keep it if it no longer fits your potentially offset capital gains and/or of 0%, 15%, or 20%, depending on your
strategy (see “Investing Mindfully,” ordinary income. income level.
Note that any losses must first be
applied to gains of the same type (i.e.,
Using a tax loss to get a tax break long- or short-term gains) before they
A hypothetical investor who realized $10,000 in short-term capital gains can be applied to gains of a different
and $15,000 in capital losses could use tax-loss harvesting to cut down her type. For example, if you have short-
tax bill—this year and in future years. and long-term gains, you must use any
long-term losses to offset your long-
Short-term capital gains: $10,000 term gains first; then you can use any
remaining long-term losses to offset
your short-term gains.
n Wash-sale rule: If you plan to
take a loss and reinvest the proceeds,
be mindful of the wash-sale rule,
which stipulates you can’t use the
losses to offset gains if you purchase
the same or a “substantially identical”
Short-term capital losses: $15,000
investment within 30 days before or
after the sale. Unfortunately, there’s
no clear guidance on what constitutes
a substantially identical investment.
Stocks are fairly straightforward, but
for exchange-traded funds and mutual
funds, it’s best to err on the side of
caution by selecting a fund that tracks
a different benchmark or has a mark-
edly different investment mix.
A financial planner or qualified tax
$10,000 of capital $3,000 of losses $2,000 of losses used advisor can help you make the most
losses used to offset used to offset current to offset future gains or of any investment losses—without
ordinary income running afoul of the IRS. n P H OTO I L L U S T R AT I O N B Y 30 P O I N T; G E T T Y I M AG E S / I S TO C K P H OTO
$10,000 of capital gains ordinary income
Taxes that could have been owed without tax-loss harvesting
See page 38 for important information.
Capital gains Ordinary income u This information does not constitute
and is not intended to be a substitute
$3,200 ($10,000 x 32%) $960 ($3,000 x 32%) $4,160 for specific individualized tax, legal, or
investment planning advice. Where specific
Source: Schwab Center for Financial Research. Assumes a 32% combined federal/state marginal advice is necessary or appropriate, Schwab
income tax bracket, with short-term capital gains taxed at ordinary income tax rates. The example recommends consultation with a qualified
NEXT is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific tax advisor, CPA, financial planner, or
STEPS investment product and the example does not reflect the effects of fees. investment manager. u Examples provided
are for illustrative purposes only and not
intended to be reflective of results you can
Read more insights about tax-loss harvesting and other tax strategies at schwab.com/taxes. expect to achieve. (0820-06W0)
18 | C H A R L E S S C H WA B | FA L L 2020You can also read
