Recently, a client told me that her tax preparer told her not to pay Social Security tax because it will not be there when she wants to use it. That is the absolute wrong advice to take.
Most taxpayers have to pay Social Security taxes on their income, regardless of whether they work for an employer or are self-employed.
Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $137,700 (in 2020), while the self-employed pay 12.4 percent.
Social Security tax it not a choice. I told her she was not to use that tax preparer again.

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This is the $64,000 question.

What Does the Upcoming Election Mean to My Investments?  This is a question I am asked at almost every meeting I have had lately.  Let’s look at a few things:

Here is a graph from Kiplinger magazine about the impact of elections on the markets

My advice to you is, don’t panic.  There will be some volatility, please do not try to time the markets.  Remember that investments, especially your retirement investments, are for the long term.  It is not as important how your investments are doing at this moment as it is to make sure they will last over your lifetime.

If you have not retired and are still adding to your retirement accounts, a dip in the markets is a gift.  You will be able to purchase shares of your funds at a lower price, thus accumulating more.  This could give you more shares to provide income in your retirement years.

The newest fad in investing is buying by the slice. We were used to buying traditional open-end mutual funds, then came exchange-traded funds, now we can buy stocks or funds by the slice, what does this mean?
If you wanted to buy $5 worth of a stock that costs $800 per share, you can make that happen by buying a slice for $5. That fraction of a share remains yours until you sell it. When you want to sell a slice you can simply enter how much of the value you want to sell. . You can invest $1,000 into one company, or $1 into a thousand companies—the choice is yours.
This seems, on the surface, to be an easy way to own stock in your favorite companies with little equity risk due to being able to spend so little money to invest. Many of the trading services that offer this option state they are commission and fee free, but how do they make money. You know that nothing is free.
Here is one example of how these firms make money. One of the most popular “stock slice” buying firms, advertised that it only two revenue sources: fees for its margin-trading service and interest collected on customer deposits. They failed to mention payment for order flow, even though the payments to high-speed traders were detailed in regulatory disclosures available elsewhere on the website.
I applauded anything that makes it easier for everyone to own a piece of the American Dream, but please, do your homework and have all of the facts at hand before buying your slice.

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Generally, when you procrastinate it creates problems. When you are thinking about retirement I would like you to consider a few points first.
You don’t have enough savings to cover your basic living expenses. This one’s pretty much a no-brainer. …
You’ve saved enough to cover the basics, but not leisure. …
You’re still in debt. …
You love your job. …
You don’t know what you’ll do with your time in retirement.
If you do not have positive answers to these questions, you may want to procrastinate with your retirement date.

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This past February was the first time in 36 years in business I went to all cash for a couple of clients. The pandemic had just started and two clients insisted I sell all of their holdings – I agreed after much discussion. Two weeks later they wanted to know my strategy for getting back in the market. I used the time-tested dollar-cost-averaging method to reinvest. Once again, with a heated election just a few months away, the question has come up again from a client. I repeated that I am not a fan of going to all cash, they have fundamentally sound investments, and we need to talk. One solution may be to take all of their investments back to their original cost. This will do two things – take gains off the table and reallocate them, and keep their fundamentally sound investments on the books. This may be a win- win strategy for those who insist on going to cash.

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A number of clients have found themselves retired early due to the Covid-19 shutdowns. Here are a few points I have been sharing with my clients:
First off, don’t panic. We have retirement cash flow plans in place, but now we need to reassess the retirement needs.
Second, remember you will be in retirement for many, many years. You will not need all of your money right now.
Third, it does not matter how much has been saved for retirement as how you manage your spending is the bigger part of the equation.
Lastly, we have to be flexible. Once a withdrawal pattern is set in place, remember we may have to adjust the flow up or down depending on circumstances from year to year.
We will get through this with a level head and communication.

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There are a lot of questions related to receiving a stimulus check provided by the Government during this pandemic. Many taxpayers think they have to pay tax on the stimulus they received, the opposite is actually the truth.
You don’t have to pay your stimulus check back to the government, and it will not reduce your tax refund for the year. The stimulus check is a new federal tax credit available in 2020 that the government has decided to give people now to help them through the pandemic and the recession. Tax credits provide a dollar-for-dollar reduction of your tax liability for the year, resulting in either a smaller tax bill or a larger tax refund.
So take a breath, and don’t worry about having to pay tax on this check.

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We felt the effects of the 2008 market crash all throughout 2009, I spent a lot of time telling my daughter no. I felt bad, she was in her first year of college and we felt the economic downturn big time. Every penny had to be watched, there was nothing for extras. 2020 is feeling the same after some many moths of dealing with this pandemic. Here are a few tips on how to talk to your kids during this unusual economic time:
Remain calm. “Staying calm is everything,” said Stervinou. “A child will innately think it’s their fault when you talk to them about money problems. Don’t put that on them.” Calmly explain the situation in a way that lets your kids know that you are in charge and you can handle it — whether you feel that way or not.
Answer in an age-appropriate way. A seven-year-old has no interest in IRAs or what the economic downturn has done to your balance. He or she wants to know why they can’t have a new pair of shoes.
Keep it simple. Say something like, “Mom and Dad are not working right now because of the virus. We’re being careful with our checking account and will not be spending as much as we normally do.”

We survived 2009, with care of spending, we can survive 2020.

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As part of the CARES Act, Congress approved a change to let people withdraw up to $100,000 from their 401(k) or IRA accounts this year without having to pay the typical 10% penalty for people under the age of 59½. The move was designed to help people weather the economic impacts of the Covid-19 crisis.
Some people are looking at taking advantage of this penalty waiver to pull funds from their qualified accounts to invest outside of that umbrella in riskier securities. Many investors are trying to cash in on the industries and companies that have suffered from the Covid crisis. Retirement savings are meant to be long term investments, not short term gambles. Remember that even though the penalty is waived, you will still have to pay income tax on the withdrawal.
Investing for your retirement should be the primary use of your 401(k) or IRA. Gamble with outside dollars.

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Recently a client called to tell me their work schedule was cut back to 3 days a week and their company was no longer matching 40(k) contributions. My client wanted to know if they should stop contributing to the 401(k), and deposit to an IRA instead.
The combined income for my client & their spouse is too high for a deductible IRA under the rules if there is a company plan. I reminded my client that saving pre-tax through a 401(k) is the best way to save because whole dollars are being invested. Another point I made was that dollars will go to the IRS or their 401(k) account, I prefer that the deposit go to their account. The match is just gravy and should not deter from saving for retirement.

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