Quarterly Investment - Waterford Advisors
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Fourth Quarter
Newsletter January 2021
Quarterly Investment
C O M M E N TA R Y
The Lessons of an decline. 2—The market went into
Exceptionally Instructive new high ground in midsummer, even
Year on Lifetime Investing as the pandemic and its economic
devastations were still raging. Both
Once in a very great while, there Gregory L. Kozerski outcomes were consistent with
comes a year in the economy and the CPA, CFP ®, AIFA®
President historical norms. “Waiting for the
markets that may serve as a tutorial
pullback” once a market recovery
—in effect, a master class in the
gets under way, and/or waiting for
principles of successful long-term,
the economic picture to clear before
goal-focused investing. Two thousand
investing, turned out to be formulas
twenty was just such a year.
intervention, the economy learned to for significant underperformance, as is
On December 31, 2019, the Standard most often the case.)
work around the lockdowns—and the
& Poor’s 500-Stock index closed at
result was that the S&P 500 regained The American economy—and its
3,230.78. This past New Year’s Eve,
its February high by mid-August. leading companies—continued
it closed at 3,756.07. With reinvested
The lifetime lesson here: At their to demonstrate their fundamental
dividends, the total return of the S&P
most dramatic turning points, resilience through the balance of the
500 was just over 16%.
the economy can’t be forecast, year, such that all three major stock
From these bare facts, you might indexes made multiple new highs.
and the market cannot be timed.
infer that the equity market had, in Even cash dividends appear on track
Instead, having a long-term plan
2020, quite a good year. As indeed it to exceed those paid in 2019, which
and sticking to it—acting as
did. What should be so phenomenally was the previous record year.
opposed to reacting, which is our
instructive to the long-term investor is
investment policy in a nutshell— Meanwhile, at least two vaccines were
how it got there.
once again demonstrated its developed and approved in record
From a new all-time high on February enduring value. time (with more on the way) and were
19, the market reacted to the onset going into distribution as the year
(Two corollary lessons are worth
of the greatest public health crisis ended. There seems to be good hope
noting in this regard. 1—The velocity
in a century by going down roughly that the most vulnerable segments of
and trajectory of the equity market
a third in five weeks (a classic Bear the population could get the vaccines
recovery essentially mirrored the
Market). The Federal Reserve and
violence of the February/March (continued on page 2)
Congress responded with massive
We believe wealth is not measured in dollars but in the absence of financial worry.
The Waterford Difference Love of family and desire for self-determination and dignity is what matters to our
clients and to us. That is where the Waterford difference begins.
Fourth Quarter Newsletter
Our strategy,
as 2021 dawns,
is entirely driven by
the same steadfast
principles as it was
a year ago and will be
a year from now.
by spring, and that everyone who coming year be a lackluster or even We have been assured by the Federal
wants to be vaccinated can do so by a somewhat declining year for the Reserve that it is prepared to hold
the end of the year, if not sooner. equity market, even as earnings interest rates near current levels
The second great lifetime lesson surge? Could the market repeat or until such time as the economy is
of this hugely educational year had beat its performance in 2020? functioning at something close to full
to do with the presidential election Yes, of course it’s possible. Now, capacity—perhaps as long as two or
cycle. To say that it was the most how do you and I, as long-term, three more years.
hyper-partisan in living memory goal-focused investors, make For investors, this makes it difficult to
wouldn’t adequately express it: investment policy out of these see how we can pursue our long-term
adherents to both candidates possibilities (or any other)? My goals with fixed income investments.
were genuinely convinced that the answer: we don’t, because we can’t. Equities, with their potential for
other would, if elected/reelected, Our strategy, as 2021 dawns, is long-term growth of capital—and
precipitate the end of American entirely driven by the same steadfast especially their long-term growth
democracy. principles as it was a year ago and of dividends—seem to us the more
In the event, everyone who exited will be a year from now. rational approach. We therefore tune
the market in anticipation of the out “volatility.” We act; we do not
election got thoroughly (and react. This was the most effective
almost immediately) skunked. The approach to the vicissitudes of 2020.
enduring historical lessons: never Thank you for your I believe it always will be.
get your politics mixed up with continued confidence I look forward to discussing this further
your investment policy; capital is with you in our annual review session.
rational, but politicians rarely are. and trust in our team. Until then, let me thank you again for
Still, as we look ahead to 2021, A true compliment being our clients. It is a privilege to
serve you.
there remains far more than is to entrust us in
enough uncertainty to go around. Certain material in this commentary
Is it possible that the economic assisting your loved is proprietary to and copyrighted by
recovery—and that of corporate ones to achieve their Litman Gregory Analytics and is used by
earnings—have been largely Waterford Advisors, LLC with permission.
discounted in soaring stock prices, financial goals as well. Reproduction or distribution of this
particularly those of the largest material is prohibited and all rights
growth companies? If so, might the are reserved.
Waterford Advisors, LLC 2
January 2021
T A X
CORNER
Important Information for the 2021 Tax Year
We believe that tax management is an A summary of currently enacted tax
integral part of financial planning and changes for the 2021 tax year can
portfolio management, and that it is be found in the following tables for
not possible to successfully execute your reference. We cannot emphasize
an investment strategy without taking Dan Byles-Smith enough the importance of managing
CPA,CFP ®
tax planning into consideration. All Principal portfolios in a tax-efficient manner.
of Waterford’s planners are Certified Careful tax planning is more important
Financial Planners™ and are also either than ever to minimize the impact of
Certified Public Accountants or Enrolled continual tax legislation changes.
Agents. We employ tax management If you wish to discuss your individual
strategies year-round, not just when to managing taxes and your investment tax situation, please contact our office
preparing your income tax returns. For portfolio is superior to other approaches at any time and we will be happy to
these reasons, we believe our approach and makes us unique in the wealth assist you.
management industry.
INDIVIDUAL TAX
RATES FOR 2021
Taxable Income ($) Marginal Tax Rate
Unmarried Individuals (other than Surviving
Spouses and Heads of Households)
0 to 9,950 10
9,951 to 40,525 12
40,526 to 86,375 22
86,376 to 164,925 24
164,926 to 209,425 32
209,426 to 523,600 35
Over 523,600 37
Married Individuals Filing Joint Returns
and Surviving Spouses
0 to 19,900 10
19,901 to 81,050 12
81,051 to 172,750 22
172,751 to 329,850 24
329,851 to 418,850 32
418,851 to 628,300 35
Over 628,300 37
Heads of Households
0 to 14,200 10
14,201 to 54,200 12
54,201 to 86,350 22
86,351 to 164,900 24
164,901 to 209,400 32
209,401 to 523,600 35
Over 523,600 37 CAPITAL GAINS TAX RATES FOR 2021
Married Filing Separately Taxable Income ($) Capital Gains Tax Rate
0 to 9,950 10 Unmarried Individuals Up to 40,400 0%
9,951 to 40,525 12 (other than Surviving Spouses 40,400 to 445,850 15%
40,526 to 86,375 22 and Heads of Households) Over 445,850 20%
86,376 to 164,925 24 Up to 80,800 0%
164,926 to 209,425 32 Married Individuals Filing Joint Returns 80,800 to 501,600 15%
209,426 to 314,150 35 Over 501,600 20%
Over 314,150 37 Up to 54,100 0%
Estates and Trusts Heads of Households 54,100 to 473,750 15%
0 to 2,650 10 Over 473,750 20%
2,651 to 9,550 24 Up to 40,400 0%
9,551 to 13,050 35 Married Filing Separately 40,400 to 250,800 15%
Over 13,051 37 Over 250,800 20%
(continued on page 4)
3 waterfordadv.com • 716-580-3906
Fourth Quarter Newsletter
RETIREMENT PLAN ANNUAL LIMITS FOR 2021 PROJECTED STANDARD DEDUCTION AND
PERSONAL EXEMPTION AMOUNTS FOR 2021
Defined Contribution Plans 2021 2020 Standard Deduction
Elective Deferral (Contribution) Limit for In general—The standard deduction amounts are as follows:
$19,500 $19,500
401(k), 403(b) and 457 plans Filing Status Standard Deduction
Catch-up Contribution (Age 50 and Older) $6,500 $6,500 Married Individuals Filing Joint Returns and $25,100
Maximum Deferral (Employer Surviving Spouses
$58,000 $57,000
& Employee Combined) Heads of Households $18,800
Employee Annual Compensation Limit for Unmarried Individuals
$290,000 $285,000
Calculating Contributions (other than Surviving Spouses and Heads $12,550
Annual Compensation of “Key of Households)
$185,000 $185,000
Employees” in a Top-Heavy Plan Married Individuals $12,550
Annual Compensation of Filing Separate Returns
“Highly Compensated Employee” $130,000 $130,000 In 2021, the additional standard deduction for the aged or the blind will be
in a Top-Heavy Plan $1,350 for married individuals, or $1,700 for unmarried individuals.
Personal Exemption
Defined Benefit Plans
The personal exemption for tax year 2021 remains at 0, as it was for 2020,
Maximum Annual Benefit it will remain repealed until the 2026 tax year.
$230,000 $230,000
that can be Funded
Simplified Employee Limitation for Itemized Deductions
Pensions (SEPs) For 2021, as in 2020, there is no limitation on itemized deductions. The
Maximum Compensation Limit $290,000 $285,000 overall limitation on itemized deductions will remain repealed until the 2026
Minimum Compensation Amount $650 $600 tax year.
SIMPLE Retirement Accounts Alternative Minimum Tax (AMT)
Maximum Contribution Limit $13,500 $13,500 For 2021, the threshold amount of taxable excess used to compute
tentative minimum tax is $99,950 for married taxpayers filing separate
Catch-up Contribution returns and $199,900 for all other taxpayers. The AMT exemption amounts
$3,000 $3,000
(Age 50 and Older) for taxpayers other than corporations are as follows:
Filing Status Deduction
Individual Retirement Accounts Traditional IRAs
Married Filing Jointly and Surviving Spouses $114,600
Contribution Limit $6,000 $6,000
Unmarried Individuals $73,600
Catch-up Contribution
$1,000 $1,000 Married Filing Separately $57,300
(Age 50 and Older)
Income Limits for Deductibility Child Tax Credit
If covered by a plan: The Child Tax Credit is $2,000 per qualifying child. A qualifying child is a
If one spouse is dependent under the age of 17 years old.
$105,000 - $125,000 Joint
covered by a plan:
$66,000 - $76,000 Single, HOH
$196,000 - $206,000
$0 - $10,000 MFS
Roth IRAs 2021 HEALTHCARE TAX INFORMATION
Contribution Limit $6,000 $6,000
2021 HSA Contribution Limits
Catch-up Contribution
$1,000 $1,000 Contribution Limits for Health Savings Accounts
(Age 50 and Older)
and Flex Spending Accounts:
Income Limits for ROTH Contributions
HSA Contribution Limit (Employer & Employee) – Self Only $3,600
$198,000 - $208,000 Joint
HSA Contribution Limit (Employer & Employee) – Family $7,200
$125,000 - $140,000 Single, HOH
$0 - $10,000 MFS HSA Contribution Limit – Catch-up Contribution $1,000
(Age 55 or older)
FSA Contribution Limit $2,750
2021 ANNUAL EXCLUSION FOR GIFTS
For calendar year 2021, the first $15,000 of gifts to any person
(other than gifts of future interests in property) is not included in the Eligible Long-term Care Premiums for 2021
total amount of taxable gifts made during that year. If spouses agree
For 2021 long-term care premiums includible in “medical care” are as
to gift-split, this amount is doubled to $30,000. follows:
Attained Age Before Close of Tax Year Limitations on Premiums
Gift and Estate Tax Exclusions and Credits
40 or less $450
Maximum Federal Estate Tax Rate 40% 41-50 $850
Federal Estate Tax Exclusion (married) $23,400,000 51-60 $1,690
Federal Estate Tax Exclusion (single) $11,700,000 61-70 $4,520
Federal Gift Tax Annual Exclusion $15,000 Over 70 $5,640
Waterford Advisors, LLC 4
January 2021
Waterford
H A P P E N I N G S
Here’s the latest from your friends at Waterford Advisors…
Charles Schwab
Acquires TD Ameritrade
The Charles Schwab Corporation
Marybeth Rose (“Schwab”) completed its acquisition
Planning Associate of TD Ameritrade Holding Corporation
(“TD Ameritrade”) on October 6th in
an all-stock deal valued at $22 billion
uniting two of the four largest players
in the RIA custody market into one
company housing roughly $6 trillion
in combined assets and 28 million
brokerage accounts. The combination
of resources will create a company
with enhanced scale, an even better
portfolio of world-class services and
solutions, and a talented team united by Welcome Baby Maeve!
an unwavering commitment to clients and We would like to wish a very special
a shared heritage of innovation. For the “Congratulations” to Mike and Marissa
time being, it will be business as usual Harmer on the safe arrival of their
on both platforms for our clients. Schwab beautiful baby girl this October! Maeve
has said it anticipates the integration will Rae Harmer was born October 19th
take approximately 18 to 36 months. Until weighing 6 lbs. 6 oz. Both Marissa and
then, the products, services and delivery baby Maeve are doing very well.
channels currently available from the two
companies remain largely unchanged,
and clients should continue to call
Schwab for Schwab account business
and TD Ameritrade for TD Ameritrade
account business.
Ellen Ties The Knot! Congratulations Ryan!
Please join us is congratulating
Please join us in congratulating
Michael Brennan and Ellen
Ryan DiPasquale in completing the
Bosco-Brennan on their wedding!
Ellen and Mike were married on Dan Gains Waterford examinations for the Certified Public
Accountant (CPA) Licensure! Ryan
October 18th in a private ceremony Ownership Share has passed all four of the required
at home with family. May the years
On January 1st, Dan Byles-Smith exams in the concept areas of Financial
ahead be filled with lasting joy,
became an owner of Waterford Accounting and Reporting, Auditing and
happiness, and love. Ellen and
Advisors, LLC and will now hold the title Attestation, Regulation (Ethics), and
Mike are happy to share in the
of ‘Principal’ within the firm. Dan has Business Environment and Concepts,
excitement with their 2-year-old
demonstrated tremendous commitment and has met all the other necessary
daughter, Elise and beloved
to the advancement of the firm and to requirements. Ryan will soon be licensed
cat, Phoebe.
continually enhancing client services. once his application is approved.
Please join us in congratulating him!
5 waterfordadv.com • 716-580-3906
Fourth Quarter Newsletter
eDocuments &
e S I G N AT U R E S
We asked and you answered. We custodian. This will speed up the account
surveyed a portion of our Charles opening process as well as any ongoing
Schwab and TD Ameritrade clients during account maintenance-related requests
the fall regarding their willingness to use such as beneficiary changes or transfer
eDocuments and eSignatures and the Christina M. Michalczak requests. And finally, the reduction of
CFP ®, QPFC
responses were clear: YES! Principal paper use is beneficial for all of us.
We have been working diligently over We of course understand that change can
the past few months to fully understand be hard, and for those who don’t have an
both Schwab’s and TD’s eDocument email address or access to a computer,
and eSignature tools to ensure we these changes won’t be ideal. In these
can adequately support and prepare Using digital resources instead of paper situations, and for anyone who still prefers
clients to use these features. We will will be beneficial to our client base to receive their account-related forms
be preparing step-by-step guides for in several ways. First and foremost, in paper format through the mail, we will
clients to reference and to assist them in whatever digital services we use will certainly continue to accommodate this.
working with their respective custodian’s adhere to the most current cyber security We want to make sure that the
eDocument and eSignature tools. We protocols available to ensure the safety transition to more digital and electronic
have also been looking into a standalone of our clients’ personal information. document sharing is a smooth process
program that can be used internally This will vastly improve the security of for all of our clients. At any point if you
for our own documents that we share their personal information compared to have concerns or questions, would like
with clients and that can be used with sending forms through the mail. We will to discuss the software being used,
clients who are not on the Schwab or TD also be able to have forms prepared and or discuss your account preferences,
Ameritrade platforms. out to our clients much faster than in please don’t hesitate to contact our
paper format since the forms will be sent office to speak with one of our
through email or digitally from the account staff members.
As always,
Waterford Advisors we welcome your
is preparing comments or
a step-by-step questions and
guide for using invite you to share
eDocument and our newsletter
eSignature tools. with family
and friends.
Waterford Advisors, LLC 6
January 2021
R E B A L A N C I N G:
why we do it
Periodically rebalancing portfolios is often at year-end to return the account back
thought of as a practice of risk control, but to this target. The following illustration is
it can also provide value to the long-term proof over nearly a trailing two-decade
returns of your asset mix. Investment period in recent history of how this
returns of various asset classes tend Mike Harmer simplistic portfolio management strategy
CFP ®, EA
to be highly cyclical and the process Principal can produce impressive results (see
of rebalancing will naturally reduce the table below). The results, as outlined by
exposure to those that have recently this simple example, portray a powerful
outperformed and add to the various message. A portfolio with an asset mix of
asset classes that have underperformed; (60/40), rebalanced annually, provided a
which is what can be additive to long-term higher cumulative and annualized rate of
returns.(1) return than an all equity or all fixed income
The Process index over nearly twenty years.(2)
The emphasis here In Conclusion
Rebalancing is a portfolio management
strategy that refers to the act of trading is that rebalancing The emphasis here is that rebalancing
in the investor’s account to return the works. works. This may sound like a logical
investor’s portfolio asset allocation back approach to managing a portfolio, but
to its original targeted allocation. many times it is overlooked and not
For instance, an investor may have a positions that have outperformed and executed by investors. Having a consistent
long-term strategic allocation of their add to those that have underperformed rebalancing process is critical to capturing
portfolio of (60/40), with 60% allocated over the trailing period. This is an effective the additive value potential that is available.
to equity funds and 40% allocated to method of risk management and has Rebalancing is one of many methods to
fixed income funds; all with the intention several potential benefits. add value when managing a portfolio; and
of giving them the best probability of Benefits while you may not be able to control where
achieving the long-term rate of return markets are going in the short-term, you
Using the same asset allocation as can always plan and control how you react
required to achieve their cherished previously mentioned, 60% equities
financial goals while taking on the least to their movement.(2)
and 40% fixed income, the following
amount of risk in doing so. information will serve as a simple Waterford Advisors, LLC’s financial
After the investor’s initial allocation is illustration of how annual rebalancing can planners are always available to answer
implemented, market fluctuations in increase portfolio returns long-term. any specific questions that you may
both stocks and bonds will drive the have. Please feel free to contact our
The following example will use trailing office at any time.
portfolio’s allocation to each respective data from the S&P 500 to represent equity Sources: (1) Arnott, Amy C. “Why Rebalancing
asset class to diverge from the targeted returns and the U.S. Barclay Aggregate (Almost Always) Pays Off.” Morningstar, Inc.,
mix. As an example, when stocks are Bond Index to represent fixed income
6 July 2020, www.morningstar.com/articles/990564/
why-rebalancing-almost-always-pays-off (2)
having a strong performance year it can returns. Annual rebalancing will mean Swinsburg, Brad. “A Deeper Dive: Return
Potential of Rebalancing.” Smith &
lead to the equity portion of the client’s that the client’s portfolio will start each Howard Wealth Management, 1 Aug. 2019,
portfolio increasing to a level greater calendar year with the targeted asset www.smithhowardwealth.com/a-deeper-dive-the-
return-potential-of-rebalancing-first-quarter-2019/
than the targeted 60%. This deviation mix of (60/40), with trades being made
from the target is sometimes known as
an “overweight”, and if ignored for an
extended period can result in the client’s Performance Comparison 2000 through 2018
portfolio taking on an entirely different risk/
reward profile than originally intended. Never U.S. BarCap
Annually S&P 500
Rebalanced Aggregate
By identifying a fixed periodic time frame Rebalanced Index
Set it & Let it Bond Index
for performing rebalancing, the potential
Cumulative Return 168.3% 146.1% 146.6% 145.5%
expansive deviation from your target
portfolio allocation can be avoided without Annuallized Return 5.1% 4.6% 4.6% 4.6%
the speculative practice of “market Notes: Returns are calculated using the return of the indices over each calendar year. Equity allocation is comprised
of the S&P 500 Index and the bond allocation is the U.S. BarCap Aggregate Index. Analysis does not take into
timing.” Your portfolio will simply trim the account the impact of transaction costs or taxes. Table is for purposes only.
7 waterfordadv.com • 716-580-3906
Fourth Quarter
Newsletter January 2021
To our Charles Schwab clients:
MOBILE CHECK Looking for a secure, fast and convenient way to deposit
funds into your account? Check out the Schwab Mobile
DEPOSIT Deposit feature within the Schwab Mobile App:
www.schwab.com/schwab-mobile-deposit.
Note that some restrictions may apply based on
account type and deposit amount. The daily deposit
limit will be shown on the deposit screen within the app.
To our TD Ameritrade clients:
Looking for a secure, fast and convenient way to deposit
funds into your account? Check out the TD Mobile Deposit
feature within the TD Mobile App: www.tdameritrade.com/
mobile-check-deposit. Note that some restrictions may
apply based on account type and deposit amount:
Non-retirement accounts allow deposits up to $50,000
per day; Retirement accounts allow deposits up to
$100,000 per day.
Certified Financial Planner™
Visit us online at waterfordadv.com
Phone: 716-580-3906
3858 North Buffalo Road, Suite 2
Orchard Park, New York 14127
Inside this issue…
Tax Corner Happenings
Page 3 Page 5
eDocuments Rebalancing
& eSignatures Portfolios
Page 6 Page 7
Securities offered through Cadaret, Grant & Co., Inc., member FINRA/SIPC.
Advisory services offered through Waterford Advisors LLC, an SEC Registered
Investment Advisor. Waterford Advisors and Cadaret, Grant & Co., Inc. are separate
entities.
All information is believed to be from reliable sources; however, we make no
representation as to its completeness or accuracy.
You can also read
