The intertwining realms of financial planning and taxation present both a challenge and an opportunity for investors. In a world driven by the allure of high returns and the desire for wealth accumulation, there stands a constant and unwavering reality: the impact of taxes.

This article explores the core implications of taxation on our income and investments, highlighting the value of understanding after-tax returns and the strategies that can be harnessed for optimal financial growth.

The Ever-Present World of Taxation

It’s a straightforward notion: when you earn, you owe. For every paycheck we receive, a portion is allocated to taxes. Similarly, investments, be it in stocks, real estate, bonds, or other assets, don’t escape the tax net. Whether it’s capital gains, dividends, or interest, the government typically gets its share.

To provide a clearer perspective, let’s create a hypothetical scenario. Imagine an investment that offers a 10% return. At face value, this seems like a profitable venture. However, if the gains from this investment are taxed at 30%, the actual return drops to just 7%. Over time and compounded, this difference can result in substantial financial disparities.

What Truly Lies Beneath: After-Tax Returns

The essence of smart investing isn’t just about identifying high returns but understanding what those returns translate to in real, spendable income. This is where the concept of after-tax return becomes paramount. It represents the genuine growth of an investment after all tax liabilities are met.

Using the aforementioned example, even if one investment boasts a pre-tax return of 8% and another offers 6%, the latter might be more profitable post-tax, depending on associated tax liabilities. Consequently, investors need to look beyond the headline numbers and consider the real-world implications of taxes.

Common Pitfalls: Learn from the Missteps of Others

Every investment journey, especially for those not armed with professional advice, is a learning curve. While each experience is a potential lesson, awareness of common pitfalls can save investors both money and regret.

• The Timing Trap: The difference between short-term and long-term capital gains can be just a single day. Many enthusiastic investors, lured by market trends, liquidate assets just shy of the one-year mark, inadvertently incurring higher tax implications.
• Overlooking the Nuances of Dividends: While dividends serve as a lucrative stream of passive income, they come with their own tax intricacies. Different types of dividends, like qualified and non-qualified, can carry distinct tax rates. Failing to account for these differences can result in unexpected tax bills.
• Forfeiting Tax-Advantaged Opportunities: Each year presents an opportunity to invest within tax-advantaged spaces, yet many investors let this slide. The compounded growth potential lost due to missed contributions can equate to significant sums in the long run.
• Inertia in Portfolio Management: A static portfolio is often a drifting one. As markets ebb and flow, the initial asset allocation of a portfolio can shift. Without regular rebalancing, investors might inadvertently amplify their exposure to tax liabilities. Regular check-ins and adjustments, always with a tax-aware lens, can ensure a portfolio remains aligned with its intended strategy and risk profile.

Strategies to Shine in the Tax Game

While the shadow of taxation looms large over the financial landscape, insightful strategies can guide investors towards achieving optimal after-tax returns.

• Tax-Deferred Accounts: Tools such as IRAs, 401(k)s, and other retirement accounts stand as invaluable shields in the financial arsenal. Within these protective bubbles, investments can flourish, unburdened by immediate taxation. This deferral can be especially beneficial when considering the compounding effect over time. When withdrawals are finally made, often during retirement years, many find themselves in lower tax brackets, yielding potential tax savings.
• Tax-Efficient Investing: Beyond the mere act of investing is the art of discerning between assets. Some investments, by their very nature, induce fewer taxable events. Index funds or ETFs, characterized by their low turnover, produce minimal capital gain distributions, often leading to a lower tax liability. By orienting one’s portfolio towards these tax-efficient assets, investors can ensure more of their gains stay in their pockets.
• Tax-Loss Harvesting: In the unpredictable world of investments, downturns are inevitable. However, these downturns can be harnessed through tax-loss harvesting. By strategically realizing or “harvesting” losses, investors can offset taxable gains, creating a balancing act that can reduce tax liabilities. Furthermore, this strategy can provide an opportunity to reposition one’s portfolio without the typical tax repercussions.
• The Wisdom of Patience: In the realm of investments, patience is not just a virtue; it’s a tangible strategy. Assets held for more than a year often transition from higher short-term capital gains rates to the typically more favorable long-term rates. By merely holding on and resisting the urge for premature liquidation, investors can realize significant tax savings.
• Strategic Asset Location: This involves holding the right assets in the most tax-efficient accounts. For example, municipal bonds, which are already tax-free, would be inefficiently placed in a Roth IRA. Conversely, assets that generate significant taxable income or short-term capital gains might be better situated in tax-deferred accounts. Understanding the tax attributes of both the investment and the account can significantly enhance after-tax returns.

The Road Ahead: Adaptability is Key

Tax codes aren’t static. They evolve, reflecting socio-economic changes and political agendas. As recent history has shown, significant tax reforms can come into play, altering investment landscapes. Thus, staying informed and adaptable is the key.

For many, collaborating with our firm as we are professionals, offers a pathway to navigate these complexities. These professionals, with their fingers on the pulse of the financial world, can provide guidance tailored to individual needs, ensuring that each investment move is tax-efficient.

Final Thoughts

In the grand tapestry of financial planning, taxes form an intricate pattern that we cannot afford to ignore. Their impact is far-reaching, influencing the very core of our financial decisions and outcomes. By embracing a holistic approach—one that considers the after-tax implications and adopts tax-savvy strategies—investors can not only meet their fiscal obligations but also ensure their wealth grows efficiently and robustly. After all, in the financial world, knowledge is not just power; it’s profit.

If you have any questions, give us a call.

Have a great weekend!



Source: Ballentine Capital Advisors 

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Golf Tip of the Week

Tour Pro Survives ‘Insane’ Golf-Ball Rules Conundrum That Could Have Led To A DQ

Win or lose on Sunday at the Korn Ferry Tour’s NV5 Invitational, Ryan McCormick will have plenty to remember from his week at The Glen Club in Glenview, Ill. He starts Sunday one off the lead, after opening his tournament by shooting a career-best opening-round 60. After that round, McCormick talked about how he prepares for KFT events by replicating courses on the PGA Tour @2K video game, creating some intriguing social buzz.

If McCormick, 31, was ready to be labeled the “video game guy,” he nearly changed the narrative entirely during his second round on Friday when he found himself in a precarious equipment situation.

On Thursday night McCormick was working on his putting stroke in his hotel room, rolling a 2019 model of the Titielst Pro-V1 golf ball. It’s not the one he plays in competition—he uses a 2023 model—but he put it his bag nonetheless as he put his clubs away for the night.

The next day at the course, McCormick wound up picking that ball out of his bag when teeing off on his first hole, the course’s 10th. That created a dilemma as all the other balls in his bag were the 2023 model. With the Model Local Rule G-4—also known as the One Ball Rule—in effect, that meant McCormick could only play the older model ball during the entirety of his second round. And since he had just the one, well, he knew he couldn’t lose it.

Which is what he feared he might have done on the 12th hole when he hit the ball into the fescue. “It was, like, insane,” McCormick said. “I’m honestly thinking DQ’d. Like, if I don’t find the ball, I’m going home.”

That’s when McCormick talked to rules officials to explain his situation. Luckily they found the ball, but officials then sent out word to others in the field asking if anybody had extra 2019 models that they could spare.

“I was on the range warming up, and (they) was walking on the range asking if anyone had the 2019, and I was like, ‘Yeah, I’ve got some,’” fellow pro Trace Crowe said. “I guess I’m one of the few out here that haven’t switched to the new one yet.”

A handful were retrieved and delivered to McCormick.

“I owe them whatever they want,” McCormick said. “It was on my mind for a solid hour to start the day … I was going to have my caddie go back to the hotel, see if I could find one. Basically like fire him, hire somebody, have him come back … we went through the whole thing. The only shot I was worried about was 18, really [a par 5 with water fronting the green]. I would have just laid up left

“It’s the most rattled I’ve ever been in my career … I was like, literally, if I lose this golf ball, my tournament was over. Like, I can’t play, I have no more golf balls. Insane.”

As it turned out McCormick never lost a ball, shooting a two-under 69. He followed that up with a 65 on Saturday to sit one back of the leader entering the final round.

Oh, and that leader? It’s good Samaritan Crowe, who shot a Saturday 63 and sits at 20 under for the tournament.

“That’s just the way the world works right there,” Crowe said of playing with McCormick in Sunday’s final pairing. “It’s going to be awesome. Ryan’s a great guy … happy I gave him the balls, and we’ll see how happy I am tomorrow afternoon.”




Tip adapted from golfdigest.comⁱ

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Recipe of the Week

Mini Crab Cakes With Mustard Creme Fraiche

15 Servings

Ingredients

Mini Crab Cakes

• 2 slices white sandwich bread
• 1 pound jumbo lump crabmeat, picked through for bits of shell
• 1/4 cup mayonnaise
• 1 tablespoon lemon zest, plus lemon wedges, for serving
• 1 teaspoon Worcestershire sauce
• 1/2 teaspoon seafood seasoning, such as Old Bay
• 1/8 teaspoon cayenne pepper
• 2 scallions, finely chopped
• Kosher salt and freshly ground black pepper
• 1 large egg, beaten
• 3 tablespoons unsalted butter
• 1 tablespoon chopped chives, for garnish

Mustard Crème Frsiche

• 1/4 cup creme fraiche
• 1 tablespoon whole-grain mustard
• 1 teaspoon Dijon Mustard
• 1/8 teaspoon seafood seasoning, such as Old Bay

Instructions

• For the mustard creme fraiche: Mix together the creme fraiche, whole-grain mustard, Dijon and seafood seasoning in a small bowl and refrigerate until ready to serve.
• For the mini crab cakes: Pulse the bread in a food processor to make coarse breadcrumbs; transfer to a large bowl. Add the crab, mayonnaise, lemon zest, Worcestershire, seafood seasoning, cayenne, scallions, 1/4 teaspoon salt and a few grinds of pepper. Mix gently to combine. Add the egg and mix gently but thoroughly. Roll the mixture into about 15 golf ball-sized rounds, then arrange them on a foil-lined baking sheet and flatten them slightly. Refrigerate at least 30 minutes to set.
• Melt the butter in a large nonstick skillet over medium heat. Cook the crab cakes, in batches if necessary, turning once, until golden brown on both sides and heated through, 3 to 4 minutes per side.
• Arrange the crab cakes on a serving platter and serve with the mustard creme fraiche dolloped on top or in a small bowl on the side. Sprinkle with the chives and serve with lemon wedges.

 

 

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Health Tip of the Week

Home Remedies For Vertigo

The spinning sensation and dizziness you get from vertigo can limit your activities and make you feel sick. Depending on the cause, though, some simple maneuvers you can do at home might bring relief.

The most common type of this condition is BPPV (benign paroxysmal positional vertigo). It happens when small crystals of calcium get loose in your inner ear. You may feel it when you’re getting in or out of bed, or tilting your head up. People over age 60 are more likely to get BPPV. It’s also the easiest type of vertigo to treat.

Before you try to treat it yourself, see your doctor. If you have vertigo, you’ll need to know what type it is and which ear has the problem. To determine affected side:

1. Sit on a bed so that if you lie down, your head hangs slightly over the end of the bed.
2. Turn your head to the right and lie back quickly.
3. Wait 1 minute.
4. If you feel dizzy, then the right ear is your affected ear.
5. If no dizziness occurs, sit up.
6. Wait 1 minute.
7. Turn your head to the left and lie back quickly. 
8. Wait 1 minute. 
9. If you feel dizzy, then the left ear is your affected ear.

If you have BPPV, certain actions can move the calcium crystals that cause the problem out of your ear canal. That should bring relief.

Epley Maneuver

If your vertigo comes from your left ear and side:

1. Sit on the edge of your bed. Turn your head 45 degrees to the left (not as far as your left shoulder). Place a pillow under you so when you lie down, it rests between your shoulders rather than under your head.
2. Quickly lie down on your back, with your head on the bed (still at the 45-degree angle). The pillow should be under your shoulders. Wait 30 seconds (for any vertigo to stop).
3. Turn your head halfway (90 degrees) to the right without raising it. Wait 30 seconds.
4. Turn your head and body on its side to the right, so you’re looking at the floor. Wait 30 seconds.
5. Slowly sit up, but remain on the bed a few minutes.
6. If the vertigo comes from your right ear, reverse these instructions. Sit on your bed, turn your head 45 degrees to the right, and so on.

Do these movements three times before going to bed each night, until you’ve gone 24 hours without dizziness.

Semont Maneuver

This exercise is for dizziness from the left ear and side:

1. Sit on the edge of your bed. Turn your head 45 degrees to the right.
2. Quickly lie down on your left side. Stay there for 30 seconds.
3. Quickly move to lie down on the opposite end of your bed. Don’t change the direction of your head. Keep it at a 45-degree angle and lie for 30 seconds. Look at the floor.
4. Return slowly to sitting and wait a few minutes.
5. Reverse these moves for the right ear.

Again, do these moves three times a day until you go 24 hours without vertigo.

Half-Somersault or Foster Maneuver

Some people find this maneuver easier to do:

1. Kneel down and look up at the ceiling for a few seconds.
2. Touch the floor with your head, tucking your chin so your head goes toward your knees. Wait for any vertigo to stop (about 30 seconds).
3. Turn your head in the direction of your affected ear (i.e. if you feel dizzy on your left side, turn to face your left elbow). Wait 30 seconds.
4. Quickly raise your head so it’s level with your back while you’re on all fours. Keep your head at that 45-degree angle. Wait 30 seconds.
5. Quickly raise your head so it’s fully upright, but keep your head turned to the shoulder of the side you’re working on. Then slowly stand up.

You may have to repeat this a few times for relief. After the first round, rest 15 minutes before trying a second time.

Brandt-Daroff Exercise

Here’s what you need to do for this exercise:

1. Start in an upright, seated position on your bed.
2. Tilt your head around a 45-degree angle away from the side causing your vertigo. Move into the lying position on one side with your nose pointed up.
3. Stay in this position for about 30 seconds or until the vertigo eases off, whichever is longer. Then move back to the seated position.
4. Repeat on the other side.

You should do these movements from three to five times in a session. You should have three sessions a day for up to 2 weeks, or until the vertigo is gone for 2 days.

More Exercises for Vertigo

Repetitive movements can help your brain and body overcome the confusing signals of vertigo. They can also help you manage the sudden start of dizziness and motion sensations. 

When you begin these exercises for vertigo, start slowly and understand that initial reactions may make you feel worse. Make sure that you complete these exercises individually, taking breaks between each one. Speak with your doctor before beginning any of these exercises, and let them know if your vertigo symptoms become more serious or if you have any new symptoms.

Marching in Place Exercise

Marching in place can help you with balance while standing, and it acts as a stepping stone for more advanced movements.

Step 1: Stand near a wall or corner, or place a chair nearby. Place your arms by your side.

Step 2: Lift your right knee, followed by your left knee as you march. Try to raise your knees as high as comfort allows.

Step 3: March in place 20 times. 

Repeat this exercise two times a day times, and try to extend each set to 30 marching steps.

Turning in Place Exercise

Turning in place is a more advanced exercise than marching in place. Make sure you have a chair or sturdy walker nearby in case you feel dizzy.

Step 1: Stand straight with your arms at your sides. 

Step 2: Slowly turn left in a half-circle, equal to 180 degrees. 

Step 3: Stop moving and stand motionless for 10 to 15 seconds. 

Step 4: Slowly turn right in a half-circle. Stand still for 10 to 15 seconds.

Repeat this exercise five times. As you complete each round, favor moving in the direction that makes you feel dizzier. 

When completing the standing exercises for vertigo, stand near a wall or handrail, or set up a chair, walker, or other personal assistance device in case you lose your balance. If you have a higher risk of falling, ask someone to stand close by as you work on these exercises. 

Follow Up

For the rest of the day after doing any of these exercises, try not to tilt your head too far up or down. If you don’t feel better after a week of trying these moves, talk to your doctor again, and ask them what they want you to do next.

You might not be doing the exercises right, or something else might be the cause of your dizziness.




Tip adapted from WebMD.comⁱⁱⁱ 

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Ballentine Capital Advisors is a registered investment adviser. The advisory services of Ballentine Capital Advisors are not made available in any jurisdiction in which Ballentine Capital Advisors is not registered or is otherwise exempt from registration.

Please review Ballentine Capital Advisors Disclosure Brochure for a complete explanation of fees. Investing involves risks. Investments are not guaranteed and may lose value.

This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy, or investment product.

No representation is being made that any account will or is likely to achieve future profits or losses similar to those shown. You should not assume that investment decisions we make in the future will be profitable or equal the investment performance of the past. Past performance does not indicate future results.

Advisory services through Ballentine Capital Advisors, Inc.

ⁱ https://www.golfdigest.com/story/ryan-mccormick-korn-ferry-tour-pro-v1-one-ball-rule-near-dq-rules
ⁱⁱ https://www.foodnetwork.com/recipes/valerie-bertinelli/mini-crab-cakes-with-mustard-creme-fraiche-7106861
ⁱⁱⁱ https://www.webmd.com/brain/home-remedies-vertigo