Control What You Can Control, and Don't Sweat The Rest

There are many circumstances in life and business that we have no control over. We may accept that we have no control over these uncontrollable circumstances. If we accept what we cannot control, then we may be pragmatic and strategic in our decision-making. You absolutely control your decisions. We all prefer when our investment account goes up, while accepting the risk ouraccount may go down. We may decide to eliminate investment risk, which is a choice. However, if we structured a portfolio without investment risk, possibly earning 3-5%, we may increase liquidity risk and/or longevity risk. Liquidity risk is your ability to access money from your account, without penalties, when desired. Longevity risk refers to outliving your wealth because your rate of return did not keep up with your lifestyle expenses.

We have always heard income taxes are as inevitable as death! When you see your 401k or Traditional IRA account values, you hopefully realize you cannot spend that account value without every dollar being subject to income taxes. Your 401k and Traditional IRA withdrawals will be subject to income taxes. After age 59 ½ and prior to age 73, for these 13 ½ years you can control how much you withdraw without IRS penalties or Required Minimum Withdrawals (RMD). You cannot control the direction of the stock market. If your Traditional IRA value is down, due to the stock market, then you can convert to a Roth IRA in advance of a potential market recovery whereby your growth is tax-free. You largely control your tax burden because you largely control how much you withdraw* from your Traditional IRA. (*You have an annual RMD at age 73 and beyond). Tax law rarely changes within a calendar year; therefore tax decisions are more fact-based than investment decisions. Converting Traditional IRA money, at market lows, to a Roth IRA to receive tax-free future growth may have significant long-term tax advantages in some situations.

If you are near or in retirement...

If you are near or in retirement, income from your accounts may be more important than growth in the future. However, you may be concerned about the ability of your accounts to provide income since the stock market can be volatile. You may choose a fixed annuity income strategy whereby your principleis guaranteed by the issuing insurance company, and you may turn on guaranteed lifetime income any month you choose. Guaranteed lifetime income reduces Longevity risk. Social Security income, Pension income, and Private Annuity income is designed to provide income for your lifetime, regardless of length.

With your after-tax accounts (non-qualified), you may offset taxable capital gains with capital losses. The silver lining in realizing a capital loss of $5000, is that you may deduct that $5000 from future tax liability due to capital gains. We typically employ a strategy called “tax-loss harvesting” whereby capital losses are realized while reinvesting the cash proceeds immediately. We are not timingthe market when we sell at a loss, because the cash is reinvested in securities we believe may have an equal or better potential for future gains than the security sold. We cannot control the future direction of investment performance, but we do control whether we capture a loss that may have tax benefits for our client.

We manage wealth using strategies based on a family’s objectives. We seek to obtain financial objectives, unique to each client, with customized planning. In many cases, we implement a variety of strategies, with varying benefits and limitations. We are committed to communicating candidly about what cannot becontrolled (future investment performance) and potential solutions available. Our clients ultimately control whether they accept what cannot be controlled, and our advice