Between custodial accounts, Roth IRAs for kids, 529 plans, and now proposed “Trump accounts,” parents have more ways than ever to save for their children. More choice sounds good — until tax rules start colliding.

The biggest mistakes in this area aren’t about picking the “wrong” account. They’re about misunderstanding how ownership, earned income, unearned income, and kiddie tax interact over time — especially as kids grow, file their own returns, and become eligible for Roth strategies.

Each of these accounts serves a different purpose — and misunderstanding how they interact with ownership rules and kiddie tax is where planning often goes sideways.

A custodial account (UTMA/UGMA) is a taxable account opened for a minor, managed by an adult custodian, but legally owned by the child. That ownership is why investment income can trigger kiddie tax rules — and why planning around timing, gains, and future conversions matters more than most families expect.

 “Trump accounts” are a newly proposed structure designed to encourage long-term savings for children by combining elements of custodial accounts and retirement-style tax treatment.

A 529 plan is a tax-advantaged savings account designed for education expenses, where contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education costs.

A Roth IRA for a child is a retirement account funded with earned income, where contributions are made after tax, growth is tax-free, and qualified withdrawals in retirement are not taxed. A Traditional IRA for a child is similar, but contributions may be pre-tax, growth is tax-deferred, and withdrawals are taxed as ordinary income.

Our goal here is to outline a practical summary of the nuances that tend to get missed, specifically with custodial accounts and Trump Accounts.

 

Kids Can (and Often Should) Have Multiple Account Types

If a child has earned income, they are not limited to choosing either a taxable account or an IRA.

They can have both:

• A taxable account for flexibility and long‑term capital gains treatment, also known as a custodial account or UTMA/UGMA.
• A Traditional IRA or Roth IRA, funded up to their earned income limit (A Roth IRA is almost always preferred).

Key takeaway:

If there is earned income, do both when appropriate – different buckets, different tax advantages.

This flexibility matters later — especially when navigating kiddie tax thresholds and future Roth strategies.

 

Stay On Top of Kiddie Tax Rules for UTMAs (2026 Thresholds)

Custodial (UTMA/UGMA) accounts often look simple — until unearned income shows up.

For 2026, the kiddie tax works in three buckets:

• First $1,350 of unearned income → tax‑free.
• Next $1,350 → taxed at the child’s marginal rate.
• Anything above $2,700 → taxed at the parents’ marginal rate.

This is where planning becomes proactive instead of reactive.

A Planning Question Worth Asking

Should you be resetting the cost basis in existing UTMAs?

Strategic realization of gains (within the first two buckets) can reduce future tax drag — especially before income pushes the child into the parents’ bracket.

Ignoring this often means paying unnecessarily high taxes later.

 

Trump Accounts: Qualifying for the $1,000 Pilot Contribution

A common point of confusion:

• The $1,000 pilot contribution requires a separate election form (Form 4547) and only applies to children born between 2025 – 2028.
• It receives pre‑tax treatment.
• It does not count toward the annual $5,000 contribution limit.

That makes it powerful — but only if you complete the paperwork correctly.

Miss the election, and you lose the intended benefit.

 

Trump Accounts: The Importance of Form 8606 (File It Forever)

Form 8606 is not optional administrative fluff. Trump Accounts (TA) can contain a mix of pre-tax and after-tax dollars.

• Direct contributions, which are non-deductible, are treated as after-tax dollars (i.e., basis) within the TA.
• Employer contributions, qualified general contributions (donations, e.g., Dell Foundation), and the $1,000 pilot program contribution – all of which are excluded from gross income when received – are pre-tax.
• Additionally, any growth or investment income beyond the initial contributions, which is tax-deferred until withdrawal, is pre-tax within the account.

Form 8606 is the only permanent record of after‑tax basis in an IRA. Said another way, this is maintained so that your direct contributions aren’t taxed twice.

Why this matters even more for kids:

• Records get lost over time.
• Parents file returns initially, but kids eventually file on their own.
• The IRS does not reliably track this for you.

Best practice:

• File Form 8606 every single year it applies
• Keep copies indefinitely — even in years with no contributions

Think of it as a legal proof document, not a tax form.

 

Trump Accounts: The Roth Conversion Assumption Trap

A common assumption:

“We’ll just convert it to Roth when our child turns 18 and his/her tax rate is low.”

That logic breaks down under kiddie tax rules.

Why This Is Risky

• A Roth conversion is treated as unearned income.
• Unearned income is subject to the kiddie tax.
• Large conversions can be taxed at the parents’ marginal rate.

This often means:

• Waiting until the parent no longer claims their child on their tax return.
• Using partial conversions instead of all‑at‑once moves.
• Timing conversions for years when the child has no earned income, allowing more income to fall into the lower kiddie tax buckets (and likely utilizing the partial conversion strategy above).

Roth conversions are not automatically “cheap” just because the account owner is young.

 

Trump Accounts: How to Withhold on a Roth Conversion

Another easy‑to‑miss rule:

• If you withhold taxes on a Roth conversion, the amount withheld is treated as a distribution.
• For a minor, that distribution is typically subject to a 10% penalty.

Best practice:

Taxes on a conversion should come from outside funds, not from the IRA itself.

This rule applies to adults, too — but it’s especially damaging when balances are small and compounding time is long.

 

Trump Accounts: A Hidden Financial Aid Advantage

One surprising upside:

• A Trump Account is structured as a retirement account. As a result, financial aid calculations exclude it!

That can materially improve aid eligibility compared to assets counted under student ownership formulas.

Account structure matters — not just for taxes, but for future optionality.

 

Final Thoughts

When it comes to kids and money, the biggest mistakes aren’t about being too aggressive.

They’re assumptive:

• Assuming Roth conversions are always low‑tax.
• Assuming the IRS keeps track of the basis.
• Assuming custodial accounts are “simple.”

Good planning here isn’t about optimization for one year.

It’s about keeping future doors open — and avoiding rules that quietly close them.

If you’re setting up or managing accounts for kids, this is one area where getting the details right early pays off for decades. Connect with us today to discuss how we can optimize your kids’ investment strategy.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.

The IRS recently announced key contribution limit changes for 2026 for IRAs, Roth IRAs, employee-sponsored plans, and Health Savings Accounts (HSAs).  While the increased IRS contribution limits are helpful, they are largely incremental. They reflect cost-of-living adjustments rather than wholesale reform.

The broader opportunity still lies in your consistent contributions and in ensuring you’re using the available vehicles fully, rather than just hitting the new ceiling.  With that said, here’s a summary of key items to consider as you begin planning for the new year.

Key Takeaways

• Maximizing opportunities: If you are not already contributing up to the new limits (or planning to), now may be a good time to review your payroll elections or IRA contributions for the coming year. For example, bumping up an IRA contribution from $7,000 to $7,500 (if possible) or adjusting 401(k) deferrals toward the new $24,500 cap.
• Catch-up timing matters: For those age 50+, the higher catch-up limits (especially ages 60-63) provide extra room to accelerate savings. If you’re approaching that age range, consider how much you want to allocate to catch-up contributions.
• Plan sponsor/employer considerations: Employers and plan administrators will need to update plan documents, payroll systems, and participant communications to reflect the new limits and the new Roth-catch-up rule. If you’re an employee, check with your plan administrator or HR department to ensure your plan is aligned for 2026.
• Check employer plan eligibility: For example, the “super catch-up” (ages 60-63) may be optional for some employer plans. The Roth catch-up rule for high earners also depends on whether the plan offers a Roth option; if not, high earners may be restricted from making catch-up contributions.

Details of the IRS contribution limits and income thresholds for specific categories are outlined below for your reference.  As always, please consult a financial or tax advisor as appropriate for your individual situation.

IRAs and Roth IRAs

IRS Contribution Limits

• For 2026, the maximum annual contribution to a traditional IRA or a Roth IRA rises to $7,500, up from $7,000 in 2025.
• For individuals aged 50 or older, the catch-up contribution amount increases to $1,100, up from $1,000 in 2025.

Income phase-out ranges (for determining eligibility/deductibility)

• For traditional IRA deductibility (covered by a workplace plan):
  • Single filers: phase-out range is now $81,000 to $91,000 (up from $79,000 to $89,000).
  • Married filing jointly (and the contributor is covered by an employer-sponsored plan): $129,000 to $149,000 (up from $126,000 to $146,000).
• For Roth IRA contribution eligibility:
  • Single or head of household: phase-out range is now $153,000 to $168,000 (up from $150,000 to $165,000).
  • Married filing jointly: range is now $242,000 to $252,000 (up from $236,000 to $246,000).

Employer-Sponsored Plans

IRS contribution limits

• The employee elective deferral limit (for contributions to most 401(k) / 403(b) / 457(b) plans) is increased to $24,500 for 2026, up from $23,500 in 2025.

Catch-up contributions for those age 50+

• The standard catch-up contribution (age 50 and older) rises to $8,000 for 2026, up from $7,500 in 2025.
• For participants aged 60-63, the “super catch-up” limit remains $11,250 for 2026 (unchanged from 2025).
• Thus, for a 50+ participant (under 60), total possible contributions in 2026 could reach $32,500 (i.e., $24,500 + $8,000) under many plans.
• For participants aged 60-63, potentially up to $35,750 (i.e., $24,500 + $11,250).

Special rule for high-income earners (Roth catch-up)

Beginning January 1, 2026, a new rule under the SECURE 2.0 Act of 2022 requires that if a participant is age 50+ and had wages subject to Social Security (Box 3 on Form W-2) of more than $150,000 (for 2025 wages; the threshold is indexed) from that employer, then any catch-up contributions they make in 2026 must be designated as Roth (after-tax) contributions. As an employee, you may make pre-tax elective deferrals up to the standard limit ($24,500), but the catch-up portion must be in a Roth account.

• This means high-wage older workers need to confirm their plan offers a Roth option and understand the tax implications of making catch-ups as Roth.

SIMPLE plan limits

• For SIMPLE 401(k) or SIMPLE IRA plans, the IRS increased the limit for 2026 deferrals to $17,000 (from $16,500).
• The catch-up contribution for age 50+ in SIMPLE plans is $4,000 for 2026 (up from $3,500).

Health Savings Accounts (HSAs) & High-Deductible Health Plans (HDHPs)

HSA contribution limits

• For 2026, the HSA contribution limit is $4,400 for self-only coverage (up from $4,300 in 2025).
• For family coverage, the limit is $8,750 (up from $8,550).
• The catch-up contribution for those age 55 or older remains $1,000.

HDHP minimum deductibles and out-of-pocket limits

• Minimum annual deductible for self-only coverage: increases to $1,700 (from $1,650).
• For family coverage: minimum deductible increases to $3,400 (from $3,300).
• Maximum out-of-pocket (OOP) limit for self-only: $8,500 (up from $8,300).
• For family coverage: OOP limit rises to $17,000 (from $16,600).

The Bottom Line

The 2026 limit updates provide a modest but meaningful lift in tax-advantaged savings opportunities across multiple account types. For savers — particularly those in or approaching peak earning years — the higher limits and special rules (e.g., Roth catch-ups for high earners) underscore the importance of reviewing your savings strategy and tax planning in light of the changes.

If you need help maximizing your investment opportunities, connect with us today to discuss how we can best allocate your investments for your situation.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.

Gold prices jumped more than 60% this year, climbing above $4,300 per ounce. It’s no wonder people are asking, “What’s going on?” and “Is this time any different?” Let’s attempt to make sense of the recent gold rally and currency concerns. 

Some say it’s all about the “debasement trade.” The idea here is that governments may weaken their currencies by spending more than they collect in taxes and keeping interest rates low. When the dollar weakens, investors might consider buying assets like gold because they see it as holding its value better than cash.

While worries about government debt are real, history shows that predicting gold prices is hard. For long-term investors, the key question isn’t whether to own stocks, bonds, or gold, but how much of each to hold. This is especially important to consider in light of the current gold rally.

What Is Currency Debasement?

Currency debasement is an old concept that comes up every few years. Originally, it meant governments putting less precious metal in their coins, allowing them to make more coins from the same amount of metal, but each coin was worth less.

Today, most money is “fiat currency” – it has value because people trust the government that issues it, not because it’s backed by gold. Modern debasement concerns focus on whether governments will allow higher inflation (rising prices) and a weaker currency to make their debt easier to manage.

Right now, there’s mixed evidence about whether this is happening. Inflation measures are around 3% or lower, which is not extreme. Bond markets aren’t pricing in high inflation either. The 10-year Treasury yield is around 4%, and inflation expectations are only 2.3%. While the dollar has fallen about 10% this year, it’s still near its highest levels over the past 20 years.

How To Time A Gold Rally

Gold has had dramatic rallies before with mixed results, making it nearly impossible to time. In 1980, gold peaked above $800 per ounce but didn’t reach that level again until 2007. After the 2008 financial crisis, gold doubled between 2009 and 2011, hitting $1,900 per ounce, then fell back toward $1,000 over the next few years.

This chart shows gold’s performance compared to the S&P 500 stock index since 2007. While gold has had strong periods, stocks have done better over the this time period. This shows why it’s essential to think about all investments as part of a complete portfolio.

How Does Gold Compare To Other Investments This Year

Gold isn’t the only investment that’s performed well recently. Stocks (including the Magnificent 7 tech companies), international stocks, bonds, and cryptocurrencies have all contributed to portfolio returns this year. The chart shows that many types of investments have increased in value.

For many investors, gold is part of a broader commodities holding that also includes investments like silver, oil, and agricultural products. One challenge with gold is that, unlike stocks or bonds, it doesn’t generate any income through dividends or interest payments. This means a portfolio with too much gold gives up the growth potential of stocks and the income from bonds.

The Bottom Line

While some investors worry about the weakening dollar and rising gold prices, it’s important to view gold as just one part of a well-balanced portfolio that aligns with your long-term financial goals.

Unsure of the gold exposure in your portfolio? Connect with us today to discuss how we allocate to gold and other commodities as part of our overall investment allocation.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.

Understanding Key Real Estate Investment Terms

Real estate investments can be an excellent way to build wealth, but the language of real estate investing often feels like alphabet soup—cap rate, IRR, equity multiples, cash yield. For new and even experienced investors, these terms can be confusing. Having a firm grasp of the fundamentals will help you evaluate opportunities more clearly and make informed decisions.

Below, we’ll break down some of the most important real estate investment terms you’re likely to encounter.

Cap Rate (Capitalization Rate)

The cap rate measures the expected annual return from a property, assuming it was purchased in cash (without debt).

• Formula: Net Operating Income (NOI) ÷ Purchase Price
• Example: If a property generates $100,000 in NOI and is purchased for $1,250,000, the cap rate is 8%.
• Use: A quick way to compare properties or assess if the income stream justifies the price.

IRR (Internal Rate of Return)

The IRR represents the annualized return an investor expects to earn over the life of an investment, taking into account both cash flow and eventual sale proceeds.

• Why It Matters: Unlike the cap rate, IRR considers the time value of money—a dollar today is worth more than a dollar tomorrow.
• Use: Helpful when comparing investment opportunities with different hold periods and cash flow patterns.

Net Return

This is the profit remaining after all expenses, fees, and taxes have been deducted.

• Why It Matters: Gross returns can be misleading if fees and costs aren’t factored in. Net return shows what actually ends up in your pocket.

Cash Yield (Cash-on-Cash Return)

Cash yield measures the annual cash income relative to the cash you invested upfront.

• Formula: Annual Pre-Tax Cash Flow ÷ Initial Cash Invested
• Example: If you invest $200,000 and receive $20,000 in annual cash distributions, your cash yield is 10%.
• Use: Ideal for income-focused investors seeking to understand the annual cash flow generated by their investment.

Equity Multiple

The equity multiple tells you how much total cash you’ve received compared to what you invested.

• Formula: Total Cash Distributions ÷ Total Equity Invested
• Example: A $100,000 investment that returns $200,000 over its life has a 2.0x equity multiple.
• Use: A simple measure of total return—did you double your money or fall short?

Other Key Terms to Know

• NOI (Net Operating Income): Income after operating expenses, but before financing costs.
• Debt Service Coverage Ratio (DSCR): NOI ÷ Debt Payments; measures a property’s ability to cover its loan obligations.
• LTV (Loan-to-Value): Loan Amount ÷ Property Value; a lender’s measure of risk.
• Exit Strategy: How and when the investor or fund plans to sell or refinance the property.

Real Estate Ownership Options

When considering real estate, you’re not limited to buying physical properties. You can also invest through Real Estate Investment Trusts (REITs) or other pooled investment vehicles.

Key Takeaways on Taxes

• Direct Ownership: The most flexible for tax planning, especially with depreciation and 1031 exchanges to defer capital gains.
• REITs: Dividends are generally taxed at ordinary income rates, though the 20% QBI deduction (for qualified REIT dividends) can soften the blow. There are no depreciation deductions for individual investors.
• Private Funds/Syndications: Investors may receive pass-through tax benefits such as depreciation and expense deductions (reported on a K-1), which can shelter some income. However, you typically can’t control when gains are realized.

Bringing It All Together

Each path into real estate has unique strengths. If you want hands-on control and direct tax advantages, owning property may be right for you. If you value liquidity and diversification, REITs offer stock-like convenience. Private funds and syndications offer access to institutional-level deals but require patience and trust.

The most successful investors look beyond just the numbers. They evaluate their goals, time horizon, and tolerance for hands-on management before deciding whether to buy a property outright, invest in a REIT, or explore other vehicles.

Real estate investing can be complex, but with the proper knowledge, you’ll have the tools to evaluate opportunities like a pro. If you need assistance navigating these topics, connect with us today to discuss real estate investment strategies.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.

Health care costs continue to rise with no signs of slowing down. This makes health care one of the most significant expenses you’ll face in retirement. A person retiring at age 65 today may spend approximately $165,000 on healthcare during retirement. For married couples, that number almost doubles. Since people are living longer, planning for these costs is a key part of any sound financial plan.

There are various ways to prepare for future healthcare costs. These include special savings accounts with tax benefits, additional insurance to help cover Medicare gaps, long-term care insurance, and strategic retirement income planning. Each approach has advantages depending on your health, financial situation, and when you plan to retire. Using several of these strategies together often provides the best protection against rising healthcare costs.

Health Savings Accounts (HSAs) are especially useful, yet they remain underutilized. Since 2004, HSAs have evolved from being relatively unknown to becoming one of the most effective tax-saving tools available. You only qualify for an HSA if you have a high-deductible health plan.  If used strategically, they can significantly help both your current taxes and long-term financial security.

 

Health care costs keep rising at a fast pace

Health care spending in the United States has grown dramatically over recent decades. In 2023, the country spent $4.9 trillion on healthcare – approximately $12,297 per person. This equals nearly 18% of the country’s total economic output and represents a significant increase from the 5% reported in 1962!

Several factors contribute to this steady growth, including an aging population, an increase in chronic diseases, advancements in medical technology, expanded insurance coverage, and general healthcare inflation.

What planning strategies can help combat these rising prices?  Consider three main areas:

• Tax planning: Find ways to pay for health care expenses using tax-advantaged accounts like HSAs
• Retirement planning: Understand your future health care needs and find the best ways to fund them
• Estate planning: Understand how accounts like HSAs will be handled if you don’t use all the money

 

HSAs offer significant tax benefits with growing contribution limits

HSAs are available to people with high-deductible health plans. For 2026, this means plans with minimum deductibles of $1,700 for individuals or $3,400 for families.

HSAs are special because they offer three tax advantages – something not provided by any other account type:

1. Tax-deductible contributions: Money you put in reduces your taxable income
2. Tax-deferred growth: Earnings in the account grow without being taxed
3. Tax-free withdrawals: Money taken out for qualified medical expenses is never taxed

For 2026, you can contribute up to $4,400 for individual coverage and $8,750 for family coverage. If you’re 55 or older, you can make an additional $1,000 catch-up contribution.

 

Health care costs are highest in retirement

One smart HSA strategy is to treat it like a special retirement account solely for healthcare costs. This means putting in the maximum amount each year while paying current medical bills from your regular checking account. Keep receipts for medical expenses you pay out-of-pocket – you can get reimbursed from your HSA years later with no time limit.

The key is investing your HSA for long-term growth, allowing the funds to grow tax-free over time. Unlike other retirement accounts, HSAs don’t require you to take money out at a certain age. After age 65, HSAs become even more flexible – you can take money out for non-medical expenses without a penalty (though you’ll pay regular income tax).

For estate planning, if your spouse inherits your HSA, they can use it as their own with all the tax benefits. For other beneficiaries, such as children, the tax treatment is less favorable and can result in a significant tax bill.

Bottom line

Rising healthcare costs present a significant planning challenge, but HSAs offer unmatched tax advantages for one of life’s largest expenses. If you’re eligible, HSAs are a valuable addition to your financial plan.

If you need assistance navigating these costs, connect with us today to model different scenarios in your plan.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.

One Big Beautiful Bill Act: What You Need to Know

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), a comprehensive tax and spending package that reshapes numerous areas of U.S. fiscal policy. Here, we break down key items that clients and taxpayers should understand.

Individual Tax Rates & Standard Deduction

• The 2017 Trump-era tax brackets, including the 37% top rate, are now permanent.
• The standard deduction remains elevated, effective for tax years beginning in 2025.

Child & Senior Deductions

• The Child Tax Credit increases to $2.2K (from $2K), indexed for inflation.
• Seniors (65 and older) qualify for a $6K deduction ($12K for married couples), which phases out above income thresholds, through 2028.

SALT Deduction Relief

• The SALT cap increases from $10K to $40K for tax years 2025–2029 (indexed ~1% annually), then reverts.
• This applies to taxpayers with AGI ≤ $500K and phases down for higher-income earners.

Itemized Deductions & Limits

• High earners in the 37% bracket receive a reduced itemized deduction value capped at 35% of income.
• Charitable deductions are now subject to a 0.5% AGI floor
• Educators can claim qualifying expenses if they itemize their deductions.

New “Below-the-Line” Deductions

These one-time provisions expire in 2025–2028:

• Up to a $25K deduction for tips, subject to strict conditions. Phaseouts start at $150K for single filers and $300K for joint filers.
• Up to a $25K deduction for joint filers and $12.5K for all other filers for overtime. The deduction applies to the amount of overtime compensation paid above an employee’s regular rate.
• Auto loan interest deduction for U.S.-assembled vehicles can reach $10K. Phaseouts occur at $100K for single filers and $200K for joint filers.

“Trump Accounts” for Children

• New tax-advantaged IRA-like accounts receive:
  • $1K seed deposit per child born in 2025–2028.
  • Parents can contribute up to $5K annually starting in 2026; these accounts are limited to funds that track a qualified index, defined as the S&P 500 or any index composed primarily of U.S. equities.

QBI Deduction (Section 199A)

• The 20% pass-through deduction is now permanent.
• Phaseout thresholds widen in 2026 for business owners.
• A new minimum deduction of $400 applies if at least $1K in active QBI is from non-specified service trades or businesses.

Energy Credits Rollback

OBBBA eliminates key clean-energy tax incentives set by the IRA, including:

• The clean vehicle credit (up to $7.5K for new EVs; $4K for used) expires September 30, 2025.
• Energy Efficient Home Improvement Credit of up to $1.2K for energy-efficiency improvements (e.g., windows, doors, insulation, or heating and cooling equipment, and home energy audits) ends on December 31, 2025.
• Alternative Fuel Vehicle Refueling Property Credit of up to $1K for electric vehicle charging equipment installed at a taxpayer’s residence, expires June 30, 2026.
• The Residential Clean Energy Credit, which allows up to 30% of the cost of purchasing or installing solar panels, wind power, geothermal heat pumps, or fuel cell equipment, expires December 31, 2025, regardless of when the property is placed in service.

Other Provisions Overview

• Alternative Minimum Tax (AMT): reduced exemption phaseouts.
• 529 Plan and 529A ABLE account expansion.
• Qualified Opportunity Zone and small business stock gain exclusions remain in effect.
• Bonus Depreciation of Business Property: permanently restored 100% bonus depreciation for business property placed in service after January 19, 2025.
• Section 179 Deduction Limits are increased.
• The Reporting Limits for Business Payments increase the threshold of $600 to $2,000, adjusted for inflation, starting in 2026.
• U.S. Research Expenses permanently allows 100% expensing of research and experimental costs incurred for research in the U.S; this can be applied retroactively.
• Gains on Qualified Farmland Sale allow a gain from the sale of qualified farmland to be spread over four annual installments if it is sold to a “qualified farmer” (i.e., not a developer).
• Expanded Eligibility For HSA Contributions now includes “Bronze” and “Catastrophic” plans, which previously did not meet the minimum deductible and max out-of-pocket requirements. Additionally, individuals can maintain HSA eligibility while covered by a direct primary care arrangement.

Bottom Line

The OBBBA redefines the American tax landscape, locking in many Trump-era tax cuts, adding family- and senior-centric benefits, and boosting planning complexity. While it offers meaningful opportunities (especially for tip earners, business owners, and residents of high-tax states), its temporary provisions require timely action and professional strategy. The key now is strategic implementation before 2029 and positioning for what comes next. For more information on the items noted here, please refer to Michael Kitces’, industry expert, Nerd’s Eye View blog post here.

If you need help navigating this new legislation, connect with us today to understand how the One Big Beautiful Bill Act applies to you.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.

Three Strategies to Reduce Concentrated Stock

When managing your investments, having too much of one thing can be risky—especially if that “thing” is a single stock or a handful of highly correlated stocks. You’re not alone if you’ve found yourself heavily invested in one company or a related group of companies. Many investors face what’s called “concentration risk.” In simple terms, this means that a large portion of your portfolio is tied up in a single asset, which can lead to heightened volatility and missed opportunities for diversification.

Several strategies reduce the risk associated with concentrated positions while balancing liquidity, tax considerations, and long-term goals. Let’s dive into the key takeaways and practical strategies you can use in your portfolio to keep risk in check without sacrificing potential upside.

What Is Concentration Risk?

Imagine your investment portfolio is like a fruit basket. If your basket is filled with only apples, a bad harvest could leave you with a significant loss. On the other hand, a mix of apples, oranges, bananas, and grapes spreads the risk. Concentration risk is the “all apples” scenario. When more than 10% of your portfolio is comprised of one stock, any downturn in that company can ripple through your entire portfolio.

Beyond the market risks, there’s also an emotional component. Many investors have deep ties to their concentrated positions—perhaps it’s a stock inherited from family or one tied to your career. This emotional attachment can make stepping back and looking at the bigger picture hard.

The Case for Diversification

Diversification is a powerful tool to reduce volatility. When you diversify, you spread your risk across different asset classes or industries. If one investment suffers, the others might hold steady or perform well, balancing your overall returns.

Selling off a concentrated position, however, isn’t always straightforward. Tax implications, trading windows, and personal biases can complicate decisions. That’s why it’s essential to have a clear, strategic plan.

Strategy 1: Creating Liquidity Through Stock Sales

One of the most direct methods to reduce concentration risk is gradually selling part of your position. This approach—often executed through systematic or time-based selling—can help minimize market timing risk. For example, setting specific price targets above and below your current stock price can create natural “exit points” over time.

Pros:

• Boosts liquidity
• Reduces risk exposure
• Improves portfolio diversification

Cons:

• Realizes capital gains immediately, which can trigger tax liabilities
• Might miss out on future upside if the stock continues to perform well

Strategy 2: Diversify Through An Exchange Fund

Exchange funds are another useful tool, particularly if you want to diversify without selling your shares outright. In an exchange fund, multiple investors contribute their concentrated stock positions into a common pool. In return, they receive proportional interest in a diversified portfolio. This is especially attractive for investors legally or emotionally tied to their holdings.

Pros:

• Helps you diversify while deferring taxes
• Avoids the public disclosure and market impact that can come with large stock sales

Cons:

• Often involves a lock-up period (sometimes as long as seven years)
• Acceptance into the fund is subject to the fund manager’s criteria, and shares may be valued at a discount

Strategy 3: Wealth Transfer Through Charitable Giving

Charitable giving can be a win-win strategy for those passionate about philanthropy and planning for the future. Options like donor-advised funds or charitable remainder trusts allow you to transfer some of your concentrated stock holdings to charity. This helps reduce your concentration risk, provides a valuable tax deduction, and helps you leave a legacy.

Pros:

• Generates immediate charitable deductions
• Avoids immediate capital gains taxes on appreciated assets
• Reduces the size of your taxable estate

Cons:

• You give up control of the donated assets
• The process can be complex, requiring guidance from tax and legal advisors

Other Options

Although not discussed in detail, you may also consider hedging your concentrated stock position with a zero premium collar. This strategy involves buying a put option (to protect against downside risk) while simultaneously selling a call option (which caps your upside). The beauty of this strategy is that it requires no net premium payment. Alternatively, if taxes are a concern, you may consider a variable prepaid forward. This approach allows you to monetize your concentrated position without selling your shares immediately. Essentially, you receive liquidity upfront while deferring capital gains taxes until a later date. This strategy allows you to diversify your portfolio without losing the benefits of owning the underlying stock.

We’re happy to discuss the pros and cons of these two strategies in further detail if you are interested.

Overcoming Behavioral Biases

It’s important to acknowledge that managing concentrated positions isn’t just about numbers and strategies—it’s also about emotions. Investors often hold on to a stock because they believe “it’ll bounce back” or due to a personal attachment. These biases can cloud judgment, making it hard to implement a well-thought-out plan. Recognizing these biases and working with a trusted financial advisor can help bring objectivity to decision-making.

In Conclusion

Reducing concentration risk isn’t about abandoning a winning investment; it’s about ensuring that one investment doesn’t become the Achilles’ heel of your entire portfolio. Whether you sell a portion of your holdings gradually, hedge your exposure with options, utilize tax-efficient strategies like variable prepaid forwards, or diversify through exchange funds and charitable giving, the goal is the same: to create a more balanced, resilient portfolio.

The strategies we’ve discussed offer a range of options to suit different financial situations, risk tolerances, and long-term goals. It’s all about finding the right mix that provides liquidity, minimizes tax impacts, and aligns with your financial plan. If you’re overwhelmed by the complexities of managing concentrated stock positions, remember you’re not alone. Working with a knowledgeable financial advisor can provide you with tailored solutions and the confidence to take action.

Ultimately, the key to success is a balanced approach combining careful analysis with a clear understanding of your objectives. By reducing concentration risk, you not only protect your current wealth but also position yourself for more stable and diversified growth in the future.

If you have a highly concentrated position, consider scheduling a call with us.  Considering the risk and tax implications before you need the liquidity is paramount!

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.

Understanding Structured Investments: A Modern Diversifier or Unnecessary Component? 

Structured investments allow investors to tailor an investment strategy to specific market views and financial objectives. By combining a debt security with exposure to underlying assets—such as equities, commodities, currencies, or interest rates—these products offer investors a flexible tool to potentially enhance returns while managing risk.

Here we’ll discuss the key components of structured investments, available product types, and the benefits and risks involved.

Structured Investments Defined

Structured investments are financial instruments that mix traditional debt with exposure to an underlying asset(s). The unique payoff formulas of these investments allow investors to target specific market scenarios—whether bullish, bearish, or neutral—while aligning with their overall investment strategy. This innovative blend can help complement your portfolio by addressing goals including capital appreciation, income generation, or risk management.

Types of Structured Investment Products

Structured investment products are categorized into several key groups, each designed with a particular risk-return profile in mind:

• Market-Linked Notes and Deposits:
  Allows you to participate in the performance of an underlying asset while providing the return of your principal at maturity. Market-linked deposits have the added benefit of FDIC insurance, whereas market-linked notes do not, making credit risk a key consideration.
• Partial Principal at Risk Securities:
  Offers the potential for higher returns but with the possibility of losing a portion of your principal—generally between 1% to 10%—depending on market performance.
• Enhanced Yield Investments:
  This might be appealing if you’re looking for a chance at above-market periodic yields. However, the trade-off is that these products may expose you to the risk of losing some or all of your initial investment.
• Leveraged Performance Investments:
  Designed for the more aggressive investor, these securities aim to amplify returns using leverage. They often come with a cap on potential gains and carry the risk of a partial or total loss of principal.

Each type is structured with a defined term, meaning they have a specific maturity date ranging from a few months to several years. This fixed-term nature clarifies how market movements will affect your returns over time.

Benefits of Structured Investments

Structured investments offer several attractive features:

• Customization:
  They’re tailored to match a specific market outlook or financial objective, whether capital preservation, income generation, or growth through exposure to diverse asset classes.
• Diversification:
  By incorporating different underlying assets, structured investments can provide a complementary diversification tool within a broader portfolio strategy.
• Defined Outcomes:
  Since the returns are based on predetermined formulas, investors know upfront how various market scenarios could impact their final payouts.  Investments must be held to maturity to achieve the defined outcome.

Weighing the Risks

While the potential rewards can be compelling, structured investments also come with their share of risks:

• Credit Risk:
  Many investments are senior unsecured notes, and your investment is tied to the issuer’s creditworthiness. A downgrade in credit ratings or financial difficulties at the issuer can adversely affect your returns.
• Liquidity Risk:
  Structured investments may not trade on a secondary market. You may have to accept a lower price than what you initially paid if sold before maturity.
• Market Risk:
  The performance of the underlying asset(s) plays a crucial role in determining your return. Significant volatility in these markets can result in lower-than-expected payouts or even losses.
• Loss of Principal:
  Many structured investments do not promise a full return of your initial investment if market conditions turn unfavorable.

It’s essential to review the prospectus and consult with a financial advisor (or us!) to ensure these products align with your risk tolerance and investment objectives.

Are Structured Investments Right for You?

Structured investments can be a powerful addition to a diversified portfolio.  They offer exposure to new asset classes and customized risk-return profiles. However, they are not a one-size-fits-all solution. The right choice depends on your individual financial situation, market outlook, and investment goals. Whether you’re looking to preserve capital or achieve higher returns, understanding the mechanics and risks is essential to making an informed decision.

Final Thoughts

Structured investments represent an evolving segment of the capital markets that marries traditional fixed-income instruments with innovative market exposure strategies. With the ability to tailor specific market views and investment objectives, this strategy may be an intriguing option.

If you’re interested in exploring structured investments, consider scheduling a call with us.  Remember, while these products offer attractive benefits, they also come with inherent risks requiring diligent consideration.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.

 

Market Perspectives After a Nervous Start to 2025

The financial markets experienced turbulence in the opening weeks of 2025, causing many to question whether they are navigating uncertainty sufficenintly. The S&P 500 initially declined 4.3% from its December 6 peak, while the 10-year Treasury yield increased to 4.76% from 4.15%. This shift reflects investor reaction to recent economic data. The most impactful headline was a stronger-than-expected December jobs report, suggesting the Federal Reserve may be more conservative with rate cuts than anticipated. Current market expectations point to just one rate cut in 2025.

 

Short-term volatility is common following periods of strong returns

While market declines create unease, it’s worth noting that we’re only one month into the year. The previous year also began with a brief downturn before transitioning into an extended rally, which is already hard to remember! Historical data shows that temporary market pullbacks are a regular occurrence and typically present opportunities for portfolio rebalancing rather than cause for concern.

The past two years have been notably calm, with 2024’s largest S&P 500 decline being just 8% – well below historical norms. Investors who maintained their positions through various challenges, including the pandemic, record-level inflation, and ongoing geopolitical tensions, have generally been rewarded.

 

Technology leaders continue to drive market performance

The “Magnificent 7” technology stocks (recently retitled as the “BATMMAAN” stocks) are central to market performance, gaining 250% since early 2023 and nearly 500% since 2020. However, these stocks are particularly sensitive to interest rate changes, as demonstrated in 2022’s market downturn. Their outsized influence in market-weighted indices may lead to unexpected portfolio concentrations.

 

Current market valuations exceed historical averages

The S&P 500’s price-to-earnings ratio stands at 21.5x, approaching historical peaks. While this elevated valuation raises questions about future returns, current economic fundamentals remain solid with steady growth and strong corporate earnings. The key to managing high valuations is maintaining diversification across market sectors and investment styles.

 

The bottom line?

Navigating uncertainty during periods of market volatility is normal and shouldn’t prompt hasty portfolio changes. We believe volatility is the price for admission into the markets (not a fine!) and should be embraced by long-term investors.  Focus on maintaining a diversified investment approach aligned with long-term objectives.

Contact us here if you would like to review your portfolio allocation and it’s exposure across sectors.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.

Copyright (c) 2025 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein.

How does the $36 trillion national debt impact investors?

According to the U.S. Treasury, the national debt is quickly approaching $36 trillion, which fuels concerns among investors and economists alike. This means the federal debt has nearly quadrupled since before the 2008 global financial crisis and has grown yearly since 2001. This exponential growth fuels the fire when debating budget deficits, the debt ceiling, government shutdowns, stimulus bills, and more.

With the election now behind us, the large and ever-growing national debt is mounting in importance. How can investors put government spending in perspective and focus on what drives markets in the long run? It’s important to distinguish between what matters as taxpayers vs. investors. Many of us have strong personal and political views on government spending and taxation and what it may mean for the country over the coming generations.

These concerns, however, should be distinguished from whether the federal debt directly (or indirectly) impacts the economy. Without diminishing the significance of this topic, let’s remember that market returns have soared over the past two economic cycles – our advice: avoid overreacting with your investments at the expense of your long-term financial plans.

Let’s not forget that the economy has also doubled since 2008. Although it’s still unjustified, the national debt now represents 120% of GDP. However, this includes debt the government owes to itself through Treasuries held by government agencies. Excluding these, the government debt is 95% of GDP. This is still sizable, and the latest jump is due primarily to pandemic-era stimulus.

How Did This Happen?

Two words: budget deficits! Budget deficits occur when the government spends more than it collects in taxes, which adds to the total debt.

While tax revenues tend to increase as the economy grows (even without raising tax rates), they are consistently outpaced by government spending.  The shortfall is funded by government borrowing through the issuance of Treasuries.  Investors, institutions, and other countries buy these Treasuries and, in effect, fund the federal government.

The current deficit of around 6% of GDP is by no means small.  Still, there have been many periods across history – primarily during economic downturns and wars – when the government was forced to spend. History shows that, over time, deficits improve as the economy stabilizes, even if they don’t turn into surpluses.

Unfortunately, deficit spending is likely not going away, with neither political party focusing on the issue.  The accompanying chart shows that left unchecked, government projections suggest that interest payments on the debt alone could rise to $1.71 trillion in ten years.

Fact Check

• The government or U.S. citizens hold about two-thirds of the national debt.
• Other countries hold the rest, with China owning about 2.2% (although this proportion has declined).

Many investors worry that growing debt levels mean that Treasuries could be less attractive in the future. In an extreme case, this could hamper the government’s ability to roll its debt, leading to skyrocketing interest rates or weakening the dollar’s standing as the world’s reserve currency. Ultimately, many worry that the U.S. could lose its position in the global economy.

While possible, it seems unlikely, even with increased enthusiasm for dollar alternatives such as cryptocurrencies and gold. This has been a concern among economists for many decades. And yet, when the global economy faces distress, investors and governments turn to the U.S. as a safe haven. In 2011, for instance, when Standard & Poor’s downgraded the U.S. debt during the fiscal cliff standoff, investors didn’t sell their Treasuries – they rushed to buy more. Counterintuitively, this is because U.S. debt securities are still the standard for stable, risk-free assets in the world despite these challenges.

Closing Thoughts

Finally, and perhaps most importantly, markets have done well regardless of the exact level of government debt and taxes over the past century. Ironically, the best time to invest over the past two decades has been when the deficit has been the worst. These periods represent times of economic crisis when the government is engaging in emergency spending, which tends to coincide with the worst points of the market. And while this isn’t exactly a robust investment strategy, it underscores the importance of not overreacting to fiscal policy in one’s portfolio.

The federal debt is a complex and controversial topic. As with many heated issues, investors should calm their concerns and not react with their hard-earned savings or investments.

Feel free to connect with us here to further address your concerns about how the national debt may impact your investment portfolio.

Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.