The Importance of Simultaneous Investment & Tax Planning

Planning for your future is a big deal. Whether you’re just starting out in your career, building your family and want to develop your retirement still years away or you’re at the age when retirement is finally coming closer, it’s always the right time to get serious about your finances.  We cannot stress enough the importance of working with an experienced and qualified team of financial experts to come up with a plan that works. 

Tax Planning

One thing we speak about often with our clients is the importance of tax planning while you’re assembling plans and establishing goals for the future. Doing this at the same time will help to ensure that you’re choosing accounts that will work for you and that won’t likely generate exorbitant tax bills when it’s time to retire. 

A wise investment plan will incorporate tax liability strategies alongside investment planning. 

When might your plans break down? This is a complicated question, but a common situation which can impact future financial gains may occur if a vast majority of your net worth is sitting in a 401(k) or IRA.  Suddenly when retirement comes, your distributions are treated as ordinary income on the tax return which means higher taxation, per-dollar.*

Tax Loss Harvesting

With assets in a taxable account, a qualified, tactful adviser may help you structure a plan to offset taxes you’ll face on both gains and income so you have optimal asset allocation and minimal surprises.

A better plan could be to contribute to a ROTH IRA and a taxable brokerage account. This may provide ample flexibility to source funds during retirement without a large tax burden. (* per current, general tax law)

This planning should also include a design for inheritance and passing on a financial legacy in a tax-efficient way. All of the parts of the puzzle are interconnected and should be treated that way when coming up with a solid financial plan that will work for you. 

Remember, having diversity across the tax registration of accounts is often overlooked and it’s something you should focus on now. 

If you want to talk to someone who can help you create a healthy financial plan for your future, call Toomey Investment Management, Inc., today. 

A Wealth Transfer Boom is Coming – Here’s What You Should Know

Talking about the untimely passing of a loved one is never easy. However, having these important conversations early and taking the time to responsibly plan for how wealth is transferred to heirs is a critical topic. 

As baby boomers are soon expected to pass on trillions of dollars in wealth to their families over the next few decades, this very topic has become a key area of focus for many.  

It’s about more than just mapping out a plan you feel good about, but also keeping it up to date over the years and having your heirs in on the conversation early so they can make future plans as well. 

At Toomey Investment Management we can help you to understand the different methods available to effectively leverage, pass and distribute wealth to your heirs. An estate plan is unique to every client and because of that, the process may benefit from a firm with an independent approach. Our clients can expect a transparent experience as we analyze the market for investment vehicles that correlate with your goals.

If you’re on the cusp of entering your retirement years or have started to think about more effective management of your assets, we have some key things you’ll want to consider when it comes to wealth transfer. 

The event of this money shifting has already been referenced by many as the “Great Wealth Transfer.”

First, a little background. As we mentioned, the generation born between 1944 and 1964 – also known as Baby Boomers, spent the decades of their core working years amassing a lot during economic strong years and are now moving into the retirement years. Market projections indicate they’ll be transferring around $60 trillion in wealth to millennials and Gen X by 2061. The effects of these inheritances are far-reaching and without a solid plan, those funds – even large sums – could easily be squandered. 

Unexpected wealth can happen quickly and beneficiaries may not be able to keep a solid perspective when it happens. By making them aware of the future wealth and giving them time to speak with an advisor there is time to make a solid foundation and plans for preserving and growing those inheritances. 

So what can you do now? Start having these conversations about money and future inheritances with your Gen X and Millennial kids and grandkids if you plan to pass money down in the future so that they can start planning early.  

A trusted financial advisor can assist with understanding tax obligations, planning for expenses, and even allocating inheritances to meet their own financial goals.

Capital Gains Tax in Mutual Funds – What You Should Know

Investing in mutual funds is something you may have heard about before. Those looking for a solid way to invest their assets will often choose these types of investments because they can offer the chance to invest in a more diversified portfolio.

Even if you’ve never looked into options for managing your finances before, there are some important things you’ll want to keep in mind as you pursue Mutual Funds.

Understanding Capital Gains Taxes

Capital Gains Taxes, which you may be responsible for, are something many dismiss when they’re first getting started but there are many reasons to factor this in as you plan for your future.

Both long-term and short-term capital gains should be considered. When these are in a taxable account, and depending on how much you’ve earned for the year, your tax bill could come as a surprise.

Currently, there are some benefits to keeping the investments for longer than one year as it may provide greater tax savings versus selling quickly.

Understanding these different working parts may require working with a trusted investment management firm. At Toomey, we can help our clients create tax-efficient portfolios. That means using more than actively managed mutual funds – like ETFs, individual stocks/bonds, and index funds – that may minimize unfortunate tax surprises at the end of the year.

Planning for the Future

Of course, we can’t talk about Capital Gains Tax without also talking about the hot topic issue in the press right now that many investors are keeping an eye on. And that is the emerging threat of taxation of long-term capital gains which the current administration has hinted at possibly enacting.

If this were to pass and become reality, there are a number of different things that could occur in the larger market you would want to be aware of.  For example, substantially higher rates could spark mass selling in 2021 and impact the market as many become leery and take money off the table before 2022. And that’s only the start.

So what should you do? Work with a team that understands all of the parts working together and that can implement strategies that will mitigate your tax burdens for the long term.

Talk to Toomey Today!

What Should You Expect From A Financial Adviser?

Just listen carefully to any advertisement from a typical investment company and you’re bound to feel a little warm and fuzzy.  And then, there’s the old warning, “its in the fine print”.   As you know, financial “people” are everywhere; from downtown to the bank.  Whether  you already work with an adviser or you’re thinking about it, here’s what you must inquire about  as you disclose your very private, personal information to any financial planner, broker or adviser.  The questions that follow should help you to set your expectations very high, because you and your family should settle for nothing less.

Will you have mostly proprietary investmentsIn general terms, proprietary investments are those which are developed by the primary firm, itself.  For example, Fabulous Investments, Inc. is a financial firm.  The firm happens to own and sell a dozen mutual funds called Fabulous Investment Funds.  Those are called proprietary funds.  So, if you have or have been presented with investments that have the same or similar names as the investment firm, I would strongly suggest that you get another opinion.  Proprietary investments cause great concern in terms of objectivity…or the lack, thereof.   

Is your adviser a fiduciaryI believe that the fiduciary duty is the gold standard in the financial industry.  A fiduciary must be objective and pursue the best strategies for your objectives and goals.  The guidance must be in your best interests and conflicts of interest, e.g., sources of compensation, must be disclosed.   So how do you know if your adviser is a fiduciary?….Just ask

Does your adviser work for you?  Consistent with being a fiduciary, its very important that your adviser works for you.  In my opinion, advisers employed by many big-brand institutions may not be able to be completely objective.  Frequently, production requirements and specific, packaged products might supersede the best guidance for you.  I have been working with the public for over 30 years—I have seen that all too often.  

Does your adviser have recommended, respected credentials?  Now, it doesn’t mean that credentialed advisers are the absolute best, but its a good starting point.  If your adviser does have letters after their name, I would implore you to look up the acronym and investigate the criteria for credential qualifications.  You may be shocked to learn that some credentials can be used simply by joining an association, paying a fee and completing little or no educational curriculum.  In a nutshell, look for experience, education and continuing education which are required for most industry-respected credentials.

Is your adviser an experienced tax adviser\preparer?  Again, in my opinion, a thorough history of taxation and return preparation can be critical to precise guidance.  You see, a financial adviser should be much, much more than someone who facilitates investments.  Your financial world is chronically integrated with taxation.  How could you expect cutting-edge advice without the requisite experience in tax preparation?  And you may also be shocked to learn that frequently, in the fine print, the paperwork you have completed with your adviser may state something like, …we do not provide tax advice so please consult a tax adviser.  Think about that—a financial adviser who can’t provide critical tax advice? Isn’t a tax return the core of your financial picture?…you have to do one, right?  But still, it appears that your adviser may be prevented from, or be unqualified to provide detailed advice regarding the primary financial instrument in your financial world.  

Finally, be certain to inquire about and understand how your adviser will be compensated.  Its a very important question that may help you understand the fiduciary vs. salesperson distinction.    And discuss your expectations for communications with an adviser.  Your financial world can be very dynamic and you should insist on guidance-on demand.

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Toomey Investment Management, Inc. What Makes Us Different:

In the course of our new client engagements, we analyze many different portfolio’s which had originally been presented to the client as “managed”.  Although the definition of managed is a bit vague, it is reasonable to say that a managed account is overseen by an investment professional who charges separate fees for services rendered.  Within the framework of these managed accounts, investment management fees are charged, typically, as a percentage of total assets.  Honestly, many portfolio’s we see appear to be pre-constructed allocations which operate autonomously in accordance with algorithms.  These allocations were created in the home or corporate offices, in many cases.  At face value, it certainly appeared that the adviser with whom they were working had almost nothing to do with how their money had been invested as the months and years passed. 

We could recite actual cases which illustrate the “indifference” of garden-variety computer algorithms.  For example, 2008 can be remembered as the most punishing year in the investment markets in our lives; at least we hope. In early 2009, we had occasion to review historical activity of a big-name investment firm whose computer algorithms sold absolutely nothing during that debacle.  The fact that the markets rebounded in 2009 doesn’t excuse the fact that management fees were charged, though it could be argued no evidence of asset management existed.  If the computer had not been programmed to at least attempt to protect capital during 2008, just when would it execute trades to pull money from the markets?   On Wall Street, the selloff happened because the institutions and ultra-wealthy liquidated  huge volumes of their holdings.  Meanwhile, that client, and perhaps John Q. Public at-large,  was left holding the bag…and got charged fees, on top of it!!  We can only hope that you didn’t experience anything similar (yet). 

So, what makes Toomey Investment Management (TIMI) different?  TIMI operates as a fiduciary investment firm.  We work for you and we do our best every day, to find the best solutions for you and your family.  Purely from an investment management perspective, we are the accountable party in your relationship with us.  We research and design portfolio models at our offices….not someone in a distant back office who has never met you. We monitor the portfolio components every day.   And we have a history of acting and reacting to attempt to preserve capital in rocky environments.  Though it’s an imperfect science, we do not just watch while Wall Street sells off. 

Additionally, we are tax preparers and advisers, too.  It has been an incredible benefit for our clients when we can tailor guidance around IRS implications.  We are also involved with most types of insurance; life, medical, long-term care and we work closely with an auto and homeowners agent.  From our offices, we have coordinated and assisted our clients with advanced strategies including Wills, Trusts and Medicaid planning. 

So when you’re assessing financial advice, I ask you, is an algorithm good enough?  Our business was designed to look at each client independently and at many financial levels….a hands-on, personal approach.  Within one firm, you will receive customized portfolio design and management, tax analysis, insurance review and assessment of possible advanced strategies which may benefit you and your family….and you will actually be working with one firm that can complete all of it!!

Securities Offered Through Leigh Baldwin & Co., LLC


Trust entities have been employed for hundreds of years for many purposes. During my professional career, different types of trusts have gone in and out of favor as peripheral legal and planning situations have come to the fore. Though revocable trusts have been quite common throughout, irrevocable trusts were generally reserved for people of means who were able to permanently relinquish assets and even income. Well, in the past generation or so, the common application of irrevocable trusts amongst mainstream society has expanded greatly.
It is important to realize that trusts can be drafted in many forms and can be very flexible. The main parties to trusts are the grantor or settlor, the trustee or administrator and the beneficiaries. Generally, trusts are either revocable or irrevocable, can be disregarded or very rigid for tax purposes, are created to preserve assets and distribute income and even protect those who are or may become disabled. And there are many other benefits one may realize from using trusts. But they also can be a real nuisance, in hindsight.
As the term suggests, revocable trusts can be altered. Frequently, revocable trust beneficiaries and trustees are changed. During the grantors life, the grantor is often the trustee as well. The assets in the trust are typically deemed to be the property of the grantor in those cases. In general, revocable trusts are transparent, fluid and can be modified or terminated.
On the other hand, irrevocable trusts are usually very restrictive in terms of access and continued ownership by the grantor. And though possible variations include details beyond the scope of this discussion, most irrevocable trusts are set into stone once executed. Unlike the revocable version, the trust language affords very little, if any, modification of parties or terms.
So why has the irrevocable trust evolved into a common tool for more people? Its clear to me that asset protection is still the underlying objective. But unlike decades ago, the real catalyst is the unnerving prospect of long-term illness and nursing home expense. In fact, its fair to say that the majority of retirees have only one concern that could annihilate their retirement and estate plans…and that is long-term care. Chronic medical care expenses can reach $150,000 per year and more. And waiting until a family member has received a dire prognosis makes planning to shelter assets very difficult.
Enter the irrevocable trust. Though conveying assets to the trust is usually permanent, many retirees are making irrevocable transfers of the family home into a trust. And depending on the volume of other assets and income, additional transfers may be delivered to the trustee. Once conveyed, 60 months must normally elapse after transfers into trust before the system will consider those transfers to be immune from medicaid inclusion. As mentioned above, revocable trusts are typically deemed to be owned by you. As such, they will not help you insulate assets during your life. So the threat of losing the family home and other assets to medical expense has induced irrevocable transfers with the hope that 60 months will pass without chronic, debilitating diagnosis.
Please recognize that trust design and trust uses are extremely complicated and that after execution, unexpected problems may ensue without possible recourse. If you are contemplating any advanced estate planning, it is advisable to seek expert legal and financial guidance and ask many questions before executing the documents.

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Brexit: Is It Something to Worry About ?

Brexit: Is It Something to Worry About ?
The term Brexit refers to the referendum vote in the UK to decide whether their country should remain as a member of the European Union (EU). The June 23rd vote was subject to constant political and media campaigns designed to “inform” voters. Once tabulated, the “leavers” were victorious and the British exit was confirmed. It appeared that the leavers were sending a strong message–they wanted to recapture sovereignty and had grown intolerant of the immigration policies within the EU…and they were willing to swallow the sour economic pill that would ensue while in pursuit of change .
As unsavory as it sounds, global investors literally gambled on the outcome. By gauging the market reactions to the results of the vote, it was clear that powerful investors took positions on the wrong side of the equation. Accordingly, the global stock and bond markets became very volatile. Domestic stock markets dropped over 5% while indices fell over 10% in some countries. The British currency, the pound sterling, fell to 30 year lows while the US Dollar strengthened and Treasury bonds became sanctuary for nervous investors. Consequently, the yield on US Treasuries had dropped to record lows (as capital floods into Treasuries, yields drop). Within days of the financial spasms, many stock markets bounced back as investors parsed the possible immediate and longer-term impacts.
So a few weeks after the Brexit vote, what does it all mean to you? First, it’s probable that direct, adverse consequences may befall Britain for quite a while; most immediately because of the deflated value of the pound sterling. Also, imports and travel will become more expensive. The effect on commerce between Britain and the EU has yet to be seen, though many speculate that Britain will suffer some level of economic hardship for years to come. Early rumors have also surfaced that EU banks may face another crisis.
As implied above, it seems that US citizens will bear only indirect, yet material, effects. For example, complete separation from the EU could take two years or longer. Along the way, we should fully expect problems and hiccups that the investment markets will consider unsettling. US businesses that export products abroad may struggle with earnings since the strong dollar makes those products more expensive. Reverberations from the export issue could spread into many layers of our economy and will likely spill over to the stock market causing greater, chronic volatility. US imports and travelling, especially to Britain, should become more affordable. Very important short-term is that mortgage and financing rates have dropped as the falling Treasury yields have pulled those down, too. Brexit may evolve to become synonymous with Dunkirk. And like Dunkirk, positive catalysts for the future, while unrecognizable at the time, were nonetheless forged.

Stock Market Report 2016: Is This Another Bubble?

So January was an awful month for the global stock markets.  According to most reports, it was the worst start to the year ever.  In fact, the drop began on December 30th and just gained momentum into the new year.  Measured against recent market highs, several market indices had dropped by over 12 percent before mid-February.  That rapid loss of market value certainly reconstituted the fears and anxiety we experienced in 2000-2001 and 2008.  You probably recall that the former drop was the “tech” bubble and the latter was coined the “housing” bubble.  Has another yet-to-be named bubble formed since then?

Before I opine, let’s review a simple evolution of the market levels today and some contributing factors as to how we have arrived here.

By the end of the housing bubble, the broad market indices had been cut in half from recent highs.  The mortgage derivative and related products industries had collapsed and taken much of the economy and many jobs with them.  As we reflect, calling that a difficult time is a great understatement.

In an effort to support the economy and promote spending, the Federal Reserve undertook some unorthodox policies to maintain low interest rates which are still evident today. One result of the Fed actions was very low interest rates on treasury bonds, bank savings and similar accounts.  Simply stated, there was almost nowhere to earn interest for many years.  Now where would the multi-billion dollar pensions, trust accounts, mutual funds and Wall Street put money to at least earn dividends?  That’s right, the stock market.   In fact, I reference the size of the market since 2008.  Since the lows of 2009, the total value of the primary US index has roughly tripled…in 7-8 years!  One should ask, how and why has that happened and could it be justified?

So has a bubble formed in the stock market as a result of a huge demand imbalance of stock buyers who arguably had nowhere else to go for well over 5 years?  I believe the answer is yes and further, I cannot see how a bubble doesn’t exist.  Although much evidence can be cited in addition to the demand rationale above, I would direct you to locate a chart of the US stock market that covers at least a 30-year timeframe.  Pay close attention to the period from 2008 until today vis a vis any other time frame and you should become very concerned, especially when superimposing the true state of our economy during that same time.  Again, what could have supported the market values tripling in that period when most folks agree that things were not that great?  And will we look back in a few years and just say that things were fine?  Certainly,  that’s possible.  But I think it is very clear that some added caution should be exercised as we move through the next year or two.

Unwrap The Gifts Hidden Inside Your Retirement Plan

As we start the new year, I wonder how many people have taken advantage of the various types of retirement plans that were available to them during the previous year. Whether employer-sponsored plans or the various iterations of Individual Retirement Accounts, it is clear to me that most people do not optimize those plans. This is likely a function of not really understanding how they work. So hopefully, this will help you learn how you can get the most from your retirement plan.

I would like to discuss the retirement plan that is most commonly offered by employers. That plan is known as a 401(k) account. The name 401(k) refers to an IRS code section that describes the account. A 401(k) plan is a retirement savings account that allows employees to “defer” receipt of a portion of their salary and redirect it to their 401(k) account. The employee can choose how their contributions are invested from the choices in the plan. That’s a nice and convenient way for you to save for retirement, right?

Well allow me to unwrap the real gifts of these plans. First, if you have a typical 401(k), your contributions will not be assessed federal or state tax-withholdings. For many employees, that translates into saving 8-15% per-dollar of contributions that you make into your 401(k) as opposed to receiving that money in your paycheck. And while the account grows through the years, there will be no income tax on the increase or profits in the account. So if Kris Kringle contributes $5000 to his 401(k), he could save $750 by eliminating tax-withholding and if he makes $2000 in earnings he will not pay any current income taxes on them either. That means your account earnings compound in three ways; on your contributions, on the prior earnings and on tax dollars you haven’t paid. If your employer likes playing Santa, then some of your own contributions may be matched, as well. With or without the match, if you do not direct as much of your salary into the 401(k) as possible, you are electing to pay more in taxes and, of course, choosing to save less for your retirement years.

Although 401(k) plans can have a wide array of features, the primary benefits mentioned above are invaluable year-over-year and will make a tremendous difference during your retirement.

The Surviving Spouse

Though it is one of the most emotional tasks I must initiate, I commonly work very closely with clients whose spouse’s have recently passed on. This is certainly a very difficult time for everyone. Yet, I feel it is my professional responsibility to help the survivor understand the potentially serious financial implications which accompany the death of a spouse. In fact, many clients have chosen to work with me because of my experience in this area.

Essentially, it is important to realize that many tax and estate planning benefits exist between a husband and wife. But when one of them is no longer with us, those benefits cease….And only having a simple will probably won’t provide the best results for you. Therefore, new strategies must be examined and employed which will protect your survivors. It is very probable that if you do nothing, your children and other heirs will pay a significant price to inherit your assets some day….what’s worse, if you become ill or need nursing home care, there may be nothing left for them to inherit.

Some of the looming problems involve probate, nursing homes and medicaid, income taxation, retirement plans, and insurance. I have helped many of my clients mitigate these concerns by completing the necessary steps to protect both themselves and their families. And once I have done the same for you, you will be confident that you won’t be leaving a “mess” for the family. I hope you give me a call so I can help.