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How to Build Your Fortune

As an avid reader of all things finance, I come across very inspirational and insightful messages from some of the best minds out there. In a recent financial magazine article, John J. Bowen Jr. illustrated the 7 steps to follow in pursuit of generating growth and success.  Here is the paraphrased list:

1. Commit to extreme wealth - Habitually prioritize work and business dealings above personal and family concerns.  If you aren’t willing to do that, that’s ok too, just come up with a lower number and enjoy your life balance.

2. Engage in enlightened self-interest - Find your niche, and never settle on your value. Negotiate to win for you, not for a win/win.

3. Put yourself in the line of money - Working with successful entrepreneurs tends to be more significant than inheritors who have less loyalty.

4. Pay everyone involved - Do not assume people are working for satisfaction or fulfillment, everyone wants to get paid.

5. Connect for profit and results - Network with powerful relationships to drive growth.

6. Use failure to improve and refocus - Persevere and keep experimenting.

7. Stay highly centered - stick to your skillset and area of expertise. 

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The Impact of Withdrawing from your 401(k)

It is almost universally known that taking retirement funds early to fund expenses in your life, regarding lost value for your golden years can be downright crippling. There is lending for homes, lending for cars, and lending for tuition…But there isn’t a “loan” for retirement.  When you leave the workforce, and are left to fend on a fixed income budget, your 401(k) might be one of the only things left to keep you independent.  If you are part of the younger generation, you likely have doubts on the future of social security. As a CPA I am often asked by younger clients looking to buy a home or eliminate debt, if they should pull the funds from their 401(k).  When I sense it coming, and more times than not, I cut off the conversation mid-way with a resounding “DON’T DO IT!”

Let’s “run the numbers” to show the impact and how it all shakes out when we use our retirement funds to help purchase a home (one of the only purchases that actually does have future growth potential).

Let’s assume for both scenarios:

Our 401(k) retirement balance (day 0) is $100,000.

We earn $100,000 annual salary.

We contribute 3% to our 401(k) annually uninterrupted, with NO company match.

Our investments grow on average at a rate of 5% annually.

The home we are buying costs $350,000.

Property taxes and insurance are $8,000 & $1,000 annually (not a stretch for NYers)

Closing costs to buy are 3% of purchase price.

Selling costs are 6% of sale price.

Our interest rate is 4.75% fixed for 30 years.

The home will be sold in 10 years. (average life of a 30 year mortgage is actually lower around 7-8 years)

Home will grow in value at an annual inflation rate of 2%.

We are not including any other costs of home ownership (new roof, maintenance, utilities, etc.)

Ok, now that all of that’s out of the way, here’s our decision:

A. We fund a 20% down payment with our own cash. (401(k) uninterrupted), B. We fund a 10% down payment ($35,000), with our 401(k). (Requires PMI estimated at $150 per month), or C. We fund a 20% down payment ($70,000), with our 401(k).

Let’s start off easy – Decision A – If we leave our 401(k), after 30 years of compounding at 5% with 3% annual contributions, our $100,000 will grow to $630,000, an increase of $530,000, $90,000 of which is our contributions. That means $440,000 of our portfolio came from market results.

Now let’s move on to Decision B – Using $35,000 from our 401(k) to fund a 10% down payment. Over 30 years, assuming the same contributions and rate of return as above, our portfolio continuously trails and the gap widens as time goes on, leaving our account short by just over $150,000, with an ending value of $480,000 compared to $630,000 above. Excluding $90,000 of our own contributions, $240,000 in lost earnings is only the tip of the iceberg. ��

Even following our assumptions which included housing market growth, allowing us to pocket a nice gain (22%) on the property $145,000 in cash (net of expenses), when you factor in the cost of home ownership, we are nowhere near ahead of the game.  10 year total cash spent on owning that home comes to a whopping $343,000, broken down as follows:

In summary for decision B, we’ve spent over $340,000 in cash on a property, lost $240,000 in retirement earnings for a total of $580,000, over half a million, that returned back to us only  $145,000.  That does not sound appealing on any planet.

Did I mention that it gets worse? Decision C, oh Decision C how painful will you be. Take more cash taken from retirement and eliminate PMI in the house by putting 20% down or $70,000.

In this instance our projected untapped portfolio balance of $630,000 would shrink to $330,000 almost HALF, by using $70,000 as a source of our down payment. Excluding our own contributions we have lost earnings of $390,000.

These results are astonishing. That gap in the above graph between the blue wedge and yellow line is the amount of suffering you’ll have to adjust to or resolve by other means, while retired and supposedly enjoying the finer things in life.

What are the results after 10 years on the property?  Well by putting more down we are able to pocket more cash ($175,000) on our future sale than we were from Decision B, however, the results are still poor. 10 year total cash spent on owning that home comes to a whopping $345,000, broken down as follows:

In summary for decision C, we’ve spent over $345,000 in cash on a property, lost $390,000 in retirement earnings for a total of $735,000, (that’s $735,000!!!!), of which only $175,000 in cash was returned back to us by selling the house a decade later. If this doesn’t alarm you, nothing will.

These scenarios did not take into account pay raises, increases in contributions and other factors that are likely a reality.  But while we tend to think optimistically, the opposite could be true as well…After all, after the house, are children born? Does one spouse work less, or stop altogether?  At the end of the day, do you have a plan to recover the gap in lost retirement earnings?

CONCLUSION - Haste makes waste!  It is far more beneficial in the long run to be patient and disciplined in your savings, and use regular old fashioned greenbacks for a 20% down payment on your starter home. You’ll avoid PMI and by not dipping into retirement, your portfolio remains poised for compound growth and a potential gain on your appreciated property. Life is not a race.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results

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The 8th and final installment of How to be a Better Investor:  Don't Try To Time the Market

Publications and marketing and websites touting magic algorithms and actual rocket science to predict the market movements are everywhere.  Yet, despite their claims, the standard wisdom is that such models do not and cannot succeed consistently over time. Certainly, both the claims and the evidence should be interpreted with caution.

Timing the market with precision is a major challenge, but we aren't here to suggest just to buy and hold forever either. You will want to methodically, buy and sell and shift your allocations, but investing with pure speculation for where the market is headed, north or south, is a disaster in the making.

Greg Davies of Barclays once stated, “It’s time in the market, not timing the market.”  The longer we stay invested, historically has proved to translate into appreciated investments.

Why shouldn’t we time the market? Why aren't we good at it?

Our trouble with market timing is due to human nature. We can be irrational and prone to panic and overconfidence. So while we may well have a long-term investment strategy, it can be hard to stick to it. Our emotional and fear-driven nerve centers push us to react and make decisions that we often times shouldn't during a panic or euphoric point in time.

We tend to gain confidence and optimism when are stocks do well or the market rises, which typically result in investors piling in at or near the top of the market, when prices are already high. Similarly, we will be affected by widespread gloom at the bottom of a cycle, when we’re more inclined to sell out, even if prices have already dropped to well below our targeted BUY points.

Studies suggest that missing the market’s best days over a particular timespan can make a huge difference to long-term returns. For instance, in the 10 years to prior to August 2015, the FTSE All-Share index rose by about a 25%. Strip out its best 10 days during that time, however, and the 10-year return is a loss of 30%. Over a 50 point swing in value, by waiting to "time" the market and missing out on only 10 days.

On the flip side there is famous story out there about Bob (Ben Carson 2/2014), who is the worst of all market timers and his faring.  It is a fictional story but the math holds true.

(paraphrased) Bob began his career in 1970 at age 22. His plan was to save $2,000 a year during the 1970′s and bump that amount up by $2,000 each decade until he could retire at age 65 by the end of 2013.

Bob’s problem as an investor was that he only had the courage to put his money to work in the market after a huge run up.

So all of his money went into an S&P 500 index fund at the end of 1972 (I know there were no index funds in 1972, but just go with me here…see my assumptions at the bottom of the post).

The market dropped nearly 50% in 1973-74 so Bob basically put his money in at the peak of the market right before a crash.

Yet he did have one saving grace. Once he was in the market, he never sold his fund shares. He held on for dear life because he was too nervous about being wrong on both his sell decisions too.

Remember this decision because it’s a big one.

Bob didn’t feel comfortable about investing again until August of 1987 after another huge bull market.  After 15 years of saving he had $46,000 to put to work. Again he put it in an S&P 500 index fund and again he invested at a market peak just before a crash.

This time the market lost more than 30% in short order right after Bob bought his index shares.

Timing wasn’t on Bob’s side so he continued to keep his money invested as he did before.

After the 1987 crash Bob didn’t feel right about putting his future savings back into stocks until the tech bubble really ramped up at the end of 1999. He had another $68,000 of savings to put to work. This time his purchase at the end of December in 1999 was just before a 50%+ downturn that lasted until 2002.

This buy decision left Bob with some more scars but he decided to make one more big purchase with his savings before he retired.

The final investment was made in October of 2007 when he invested $64,000 which he had been saving since 2000. He rounded out his string of horrific market timing calls by buying right before another 50%+ crash from the credit blow-up.

After the financial crisis he decided to continue to save his money in the bank (another $40,000) but kept his stock investments in the market until he retired at the end of 2013.

To recap, Bob was a terrible market timer with his only stock market purchases being made at the market peaks just before extreme losses.

Here are the purchase dates, the crashes that followed and the amount invested at each date:

Luckily, while Bob couldn’t time his buys, he never sold out of the market even once.  He didn’t sell after the bear market of 1973-74 or the Black Monday in 1987 or the technology bust in 2000 or the financial crisis of 2007-09.

He never sold a single share.

So how did he do?

Even though he only bought at the very top of the market, Bob still ended up a millionaire with $1.1 million.

He allowed his investments to compound through the decades by never selling out of the market over his 40+ years of investing.  He gave himself a really long runway.

Obviously, this story was for illustrative purposes and I wouldn’t recommend a portfolio consisting of 100% in stocks of a single market like the S&P 500 unless you have an extremely high risk tolerance.

If he would have simply dollar cost averaged into the market on an annual basis with his savings he would have ended up with much more money in the end (over $2.3 million).

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

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8 Ways To Be A Better Investor: Expenses

In this week's edition of 8 Ways to be a Better Investor (#7 for those keeping track), we take a look at the Expenses you might incur on your investments and their impacts.

It's true, there's no such thing as a free lunch. In last week's edition, we discussed the power of compounding interest and the importance of starting young to grow a healthy successful portfolio.  Today, we'll examine the inverse of compounding interest, that being the notion of compounding fees.

Most fee-based advisors charge a % of the account balance. As your balance grows so does their fee. Below we have a few illustrations of how this impacts a portfolio.  Plenty of advisors (us included) believe this is a great motivator and incentive for the advisor and client to be on the same page. The thought is if we execute a successful strategy and your portfolio grows, we both win - you end up with appreciated investments and hopefully achieve your investment goals, and we end up being compensated to reward our efforts (and certainly managing $5,000,000 is a bit different than managing $50,000).

Before we get into the impacts and math of how fees eat away at your returns, let's first cover what other types of fees are out there and which ones can be reasonably reduced or eliminated altogether.

What types of fees are there?

Fees typically come in two types—transaction fees and ongoing fees (example above).

Transaction fees are charged each time you enter into a transaction, for example, when you buy a stock or mutual fund. In contrast, ongoing fees or expenses are charges you incur regularly, such as an annual account maintenance fee or a performance fee.

Transaction fees are more straightforward - every time you buy or sell a stock or a bond or a mutual fund, there is likely a fee or commission charged to the account (there are some exceptions).

Examples of ongoing fees include annual expenses mutual funds charge for operating and managing the fund you are invested in and investment adviser fees that are paid to the firm/person overseeing your portfolio.

Here is a quick illustration of what 20 years of ongoing fees can do to a portfolio, excerpted directly from an SEC Investor Bulletin titled "How fees and expenses affect your investment portfolio":

Now this isn't to suggest that we all have the time, knowledge and discipline to be investment managers or  DIYers, but you should always know how much you are paying on your account.  If you are paying for a Cadillac, but driving around in a Buick (no disrespect to Peyton or Shaq), you should rethink your strategy.

Here is another table which was compiled by NerdWallet as part of an investment fee analysis they conducted to show how the cost of fees accelerate over time. The assumptions used a single mid-cap mutual fund (like you'd find in a company 401(k)) with a 1.02% expense ratio (which according to Morningstar is below average for this type of fund) and compared it to a zero management-fee investment.

In short - after twenty years, (we can assume any age range, say from age 45-65) the value of the account lost to fees goes from 12.4% to a whopping 25.1%. I believe this case to be a bit extreme, but certainly relevant and plaguing plenty of portfolios.

So the question becomes - How do we lower our costs and still achieve the returns we want? If we conduct our due diligence and strive to reduce our costs through strategic portfolio selection, we can dramatically increase our returns.

Some suggestions that can be put to practical use are:

Finding an advisor that charges less than 1%, maybe 0.5%.

Investing in ETFs and index funds which are significantly more cost effective (and tax efficient) than mutual funds, which track the market just as good if not better.

Avoiding load fees if you do invest in mutual funds.

Paying attention to commissions - Fidelity (no affiliation) for example, has no trade costs on certain Fidelity branded ETFs which hold similar positions other ETFs hold.

Avoiding hedge funds and private equity - the standard 2/20 management and incentive fee structure alone, never mind the liquidity lock ups, when considering the actual fund performance, do not justify themselves.

Lastly, to put it all together:

6. Have a goal of what you want to spend on your investment costs.  If you invest in a 1% mutual fund through an advisor that is also charging you 1%, and your gross investment return (gain) is 5%, you are actually paying 40%!! (2%/5%) in fees on your gains.  That doesn't even include when the tax man shows up looking for his piece of the action. By finding an advisor that charges 0.5% and investing in an ETF @ 0.09% at a broker with commission free trades brings your investment cost down to 12%.  That is much more palatable.

See you next week in our final edition of 8 Ways to be a Better Investor!

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

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How To Be A Better Investor: The Importance of Compound Interest

Continuing with the theme of ‘How to be a Better Investor’, this week we are focusing on the importance of compound interest.

Albert Einstein was quoted as saying (amongst other profound statements) the most powerful force in the universe was the principle of compounding.

What does the term compound interest really mean? It's when you begin to earn interest on your interest. It is the reason for the success of just about every person on the Forbes list and yet anyone can take advantage of the exact same benefits, all you need is time and discipline.

If you are young, you likely can come up with 100 excuses to not start investing or take your retirement seriously, and you may even think that the tiny pittance remaining in your account after deducting from your paycheck taxes, Netflix, Starbucks and Lululemon surely can't make a difference. You tell yourself and others that you'll get to it, or I'm still young, or even worse, "why should I contribute, they don't match it".  I'm here to tell you, 100% of the time , you’re dead wrong.

No matter what your age, now is the time to begin saving for retirement. Prominent authors and the investment community largely agree that the single biggest investment mistake you can make is not using and/or maxing out your retirement plan.

A simple truth, often hard to accomplish in present day America, and the ONLY way to attain the wealth you desire is to spend less than you earn and save the difference. The rich are not rich because they earn a lot of money; the rich are rich because they've saved a lot of money. Those who become wealthy do so by spending less than they earn. There is no other source of saving, and, by extension, of building wealth.

Here are the nuts and bolts of how it works:

There are three things that will influence the rate at which your money compounds:

The interest (or Capital Gains/Dividends) rate you earn on your investment.

The length of time you can leave your money to compound. The longer your money can remain uninterrupted, the bigger your fortune can grow.

The tax rate, and the timing of the tax, you have to pay to the government. You will end up with far more money if you don’t have to pay taxes at all, or until the end of the compounding period rather than at the end of each year. That's why accounts such as the Traditional IRA or Roth IRA, 401(k), SEP-IRA, and such are so important.

Burton Malkiel once said “Procrastination is the natural assassin of opportunity. Every year you put off investing makes your ultimate retirement goals more difficult to achieve.”

Now let's look at some examples, pictures are most always easier to understand than plain text to illustrate math concepts.

1. Benefits of Saving Early

The chart below from JP Morgan shows how one saver (Susan) who invests for only 10 years early in her career, ends up with more wealth than another saver (Bill), who saves for 30 years later in life. By starting early, Susan was able to better take advantage of compound interest. Chris, the third saver profiled, is the ideal: He contributed steadily for his entire career.

2. When you start > How much you save.

This chart by Business Insider's Andy Kiersz also emphasizes the impact of compound interest, and the importance of starting early. Saver Emily, represented by the blue line, starts saving the exact same amount as Dave (the red line), but begins 10 years earlier. Ultimately, she contributes around 33% more than Dave over the course of her career, but ends up with almost twice as much wealth as he does.

3. Who wants to be a millionaire?

Compound interest can get you pretty far. In fact, Business Insider calculated — based on your current age and a 6% return rate — how much you need to be saving per month in order to reach $1 million by age 65.

Want to get started and make this strategy work for you? Remember the key points to success:

1. Start early.

2. Make regular investments. Don’t be haphazard. Remain disciplined, and make saving for retirement a priority.

3. Be patient. Do not touch the money. Compounding only works if you allow your investment to grow. The results will seem slow at first, but keep marching on and trust the process. Most of the magic of compounding occurs at the very end. Picture making a snowball, and then picture what it looks like after rolling down from a Rocky Mountain slope!

Be sure to check back weekly for more ways you can become a better investor. 

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

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How to be a Better Investor: The Importance of Dividends.

In this week's installment of 'How to be a Better Investor', we'll look at the importance of dividends. Now that isn't to say that, every company that pays a dividend should be bought for your portfolio, and certainly there are reasons why some companies dividends are much higher than others. However (spoiler alert), having dividend growing and paying stocks in your portfolio, is definitely a way to earn great income, just for being a shareholder.

One of the great features of dividend payers, is that as you accumulate shares and grow older, the cash flow that you'll be earning and able to use for your monthly expenses, can be significantly advantageous as you retire and rely on fixed income (social security - if it's still there, 401k, pensions, etc.).  And hey, if you do it early enough, and reinvest properly, perhaps that retirement dream can come earlier than you think!

Another great attribute of dividends, is that assuming you are a long term holder of the stocks, the dividends that you earn are taxed at lower rates than normal income (0%-20%, depending on income level).

But how do you know what companies are worth taking an investment in?  As with any other investment, you want to analyze the company and do your homework, but when it comes to dividends, starting with more mature companies, some partnerships, consumer staples and utilities are good places to look (think General Mills, Proctor & Gamble, Verizon, Johnson & Johnson, ConEd, Intel, Microsoft).

For example, a company that has been around for 60 years, has solid, consistent and growing earnings, which has paid a dividend for decades and continues to increase that dividend, is likely to be the name of a company whose products you're familiar with.   These are companies that do not want to "ruin the streak" of paying dividends to shareholders, and manage their companies to return value back to shareholders.  A large part of that strategy is via dividends.

One great tool to use to check to see if your investment's dividend is "safe" is to look at the dividend payout ratio.  This calculation (Ratio = D/NI) equals cash dividends paid divided by net income earned for the period.  The lower the number, the better. If the ratio exceeds 100%, that tells you that the company, won't be able to support the current dividend at that level of earnings.  For example (illustrative purposes only), a company like Johnson & Johnson (JNJ) - has a payout ratio of 53% and a dividend yield of 2.56%.  By contrast, if you take a look at (SSI), the dividend yield is a whopping 23%, but the stock is down over 67% from its 52 week high. Due Diligence is critical in separating the studs from the duds.By comparison to the above example, the 10 year U.S. treasury, as of this writing, has a yield of only 2.36%.

We can go back and forth on individual stock selections, but what about a whole portfolio? How does it perform over time? Well I'm glad you asked. Based on Ned Davis Research, the below chart illustrates performance of S&P 500 companies by Dividend Policy from 1972 - 2013, and compares them in bull and bear markets.  Now remember, 1972 - 2013, captures, the inflation hawk era of the early 80s, the late 80's market crash, the 90's boom & dot-com bust, the early 2000's rise and 2008 great recession, so it is time period that has certainly seen it all.

Based on this data, dividend growers and payers have outperformed the overall market, and non-payers quite handsomely, as well as providing downside protection to your portfolio, when times get rough. If you are looking to build an income stream, invest in solid stable companies and layer on some protection for a rock solid portfolio, look no further than "Dividend Aristocrats".

Be sure to check back weekly for more ways you can become a better investor.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at djpcapital@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

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8 Ways To Be A Better Investor:  Tax-Loss Harvesting

Save on Taxes by Harvesting Losses

You made money in the stock market, and cashed out some winners. Great job.  Now, before Uncle Sam comes knocking for a share of those profits, why not try and reduce the tax bill on those winning investments.

It’s called tax-loss harvesting.

No one likes to lose money, especially in the stock market, but even the best of portfolios will have some investments which have declined in value.  For the record, I would never urge a client to let a tax bill directly dictate an investment strategy, but with good management, you can use those losers to lower your tax bill and still keep your portfolio on track to meet your goals.

In a simulated exercise published in the Financial Analysts Journal (paraphrased here) (assuming 35% marginal tax rates), returns were calculated on 500 assets, over 25 years, 500 times, using two types of portfolios, buy-and-hold vs. loss harvesting.

In the loss harvesting portfolio, each asset that shows a loss is sold and repurchased immediately. In the buy-and-hold portfolio, well, that's self-explanatory, nothing was sold.

The results are dramatic. The harvested portfolio over 25 years shows a cumulative gain that is 27% HIGHER than the buy-and-hold portfolio.

When this simulation was analyzed at different tax rates, it was to no surprise, the higher the marginal tax rate, the bigger the gains from using a tax-advantaged (loss harvesting) approach.

The authors of that above simulation, finished with a list of do’s and don’ts that include the following:

Do not sell an existing portfolio to buy an index fund or a tax-managed fund; it could incur an immediate tax liability, which would defeat the purpose.

Do not sell assets at a profit unless offset by losses or under exceptional circumstances.

Harvest losses and/or encourage portfolio managers to do so.

Delay loss harvesting if benefits cannot be used right away, which could happen in a sustained declining market, when losses are accumulating.

WATCH OUT FOR WASH SALE RULES

The wash-sale rule states that your tax write-off will be disallowed if you buy the same security, a contract or option to buy the security, or a “substantially identical” security, within 30 days before or after the date you sold the loss-generating investment.

One way to avoid a wash sale, while still investing in the industry of the stock you sold at a loss, would be to consider substituting an exchange-traded fund (ETF) that targets the same industry.

If you’re not sure, you should consult a tax advisor before making the purchase.

Be sure to check back weekly for more ways you can become a better investor.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at djpcapital@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

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The Case for boring old “Dollar Cost Averaging”

In 2015, the stock market took us for a wild ride. For almost 8 months, the S&P 500 had barely moved (unless you consider 3% spectacular performance), range bound from 2050 to 2125.  Then, in Mid-August for a variety of reasons, the S&P fell to an intra-day low of around 1850, before bouncing back to 2100 in November.  Two months later, in mid January of 2016, the market tumbled back down to the mid 1800′s again.  

Those are huge swings in what appears to be a very undecided market. The talking heads are split between Bulls and Bears. Some say the recovery is still in tact, while others are running for the hills with full fledged calamity set to be right around the corner. 

So what should you be doing?  Well, for long term investors (20+ year time horizon), panic selling, and exiting the market, should be the farthest thing from your mind. However, I wouldn’t suggest backing the truck up either and going on a buying spree. With either approach, you lend yourself to trying to time the market, which is never a good idea. As the sayings go, patience is a virtue, and cooler heads prevail. 

Enter the boring old strategy of DOLLAR COST AVERAGING.

By following this simple practice, you can protect yourself against market fluctuations and downside risk. As depicted in the illustration above, regardless of where the market is, continue buying the same dollar amount of securities on a regular schedule. Instead of trying to time the market, or giving in to our primal, emotional instincts, shift the focus to accumulating assets on a regular basis.

Let’s use an example:

Let’s assume on January 1, you are contributing to your company’s 401(k) plan at a current rate of $100 dollars per month, in an investment fund that costs $20 per share. After 3 months in a flat market, you have invested $300 and hold 15 shares.

On April 1, for the next quarter the market drops, the Chicken Little’s are everywhere, predicting the next recession, and your fund’s share price drops to $15.  Being the savvy, stone cold investor that you are, you keep investing $100 each month. At June 30th, you have spent the same $300, but this time ended up purchasing, 20 shares of the fund.

From July through September, the market is still down, but has flattened out and the selling seems to have subsided; your fund is trading at $12. At the end of September, $300 has bought you 25 shares.

Finally, from Labor Day through New Years Eve, the market spikes and the Santa Claus rally is in full effect. Amazon ships billions in products, people wait in tents in the snow after Thanksgiving for meaningless gifts, it’s retail mania!!! Your investment fund is trading in this time period back up to $20 per share. Your $300 buys you 15 more shares.

So, where did we end up?

After spending $1,200 at our constant, steady pace, regardless of price, we ended up with 75 shares, at a cost basis of $16 per share. At the current price level, we are sitting comfortably on an unrealized gain in our portfolio of $300 or 25%! 

By deploying this strategy, we were effective in the lost art of “buying low”, using our long time horizon to our advantage. The market gyrations, may have spooked others into making untimely decisions, but we held firm in our strategy. In next week’s edition, we will examine how to properly perform a Re-balance on your account, and how that translates into “Selling High”.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

8 Ways To Better Invest: Rebalancing

As mentioned in the previous post, which can be found here, we are continuing with the theme of how to become a better investor. This week we are focusing on rebalancing and keeping your weighting aligned.

WHAT IS REBALANCING?

Rebalancing is the act of bringing your portfolio back to its desired asset mix by taking profits out of certain outperforming investments and re-investing those returns in under-performing assets.

Why you should do it.

Rebalancing on a periodic basis helps align your investments with your goals.

It imposes discipline on investing and prevents you from trading based on emotions.

It is a risk-minimizing strategy.

How should I do it.

Time-Linked - Rebalancing based on a predetermined schedule.

Threshold-Linked - Rebalancing is triggered when the asset mix deviates from the desired allocation by a predetermined percentage.

Time-and-threshold Linked - Portfolio is monitored as scheduled, but rebalanced only if the allocation deviates from the target mix by the predetermined minimum threshold.

Helpful Hint:

To minimize the cost of rebalancing, consider using a combination of annual rebalancing with tolerance bands of +/-5% for each asset class. This approach provides a reasonable balance between benefits and costs of rebalancing. Direct any additional investments toward the asset classes that have declined until your portfolio is back in balance. This helps avoid rebalancing costs.

Be sure to check back weekly for more ways you can become a better investor.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at djpcapital@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

8 Ways To Better Investing

Over the course of the next two months, we will discuss 8 ways you can better invest. Each week we will focus on a different way you could become a better investor. Let’s start with diversifying, using asset allocation to your advantage.

Nearly 100% of returns are directly due to asset allocation.

A number of trustworthy research studies find that asset allocation explains about 100% of the level of investor returns. That means it matters more how you divide up the pot into bonds, U.S. stocks, international stocks, etc., than it does whether you pick the best (or worst) funds in each of those asset classes.

Stock picking is a losing game for most.

It’s very, very difficult to beat the market as a stock picker. Academic studies show that the average stock picker owns concentrated small cap stocks (i.e. the riskiest type of stock), has turnover of 75% annually in his portfolio (i.e. trades far too often) and generally underperforms the market benchmark while taking on more risk.

No minimum or maximum really applies to this style of investing.

If you have $500 or $5,000,000, you are in the same boat for asset allocation – it’s available to you. Most passive funds have very low minimums. Since ETFs trade like stocks, you can buy a share in any brokerage account. For example, for around $300, you could own one share of SPDR S&P 500 (SPY) and one share of Vanguard Total Bond Market (BND), for a well-diversified 70/30 stock/bond portfolio.

Low maintenance system with only occasional changes.

Setting an asset allocation is something you only have to do once in a great while. From time to time, you’ll need to rebalance your investments as higher-return categories start to overtake the portfolio. As you get closer to retirement, you’ll want to shift to more conservative and income-generating investments. That’s about it. Make a plan, set it up, and watch your portfolio weather the storms. Embracing asset allocation as a tool is a simple way to open up efficient, low-cost options for long term investing.

Be sure to check back weekly for more ways you can become a better investor.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at djpcapital@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

Dirty Dozen Scam List 2017

Every year the IRS comes out with their Dirty Dozen list of the most popular tax scams.

Here is a summary breakdown of each scam that made the Dirty Dozen list in 2017 and how you can avoid falling victim to them as described in an article by the Journal of Accountancy.

1. PHISHING SCHEMES - The most common on the Dirty Dozen list of scams are phishing schemes. Phishing schemes are fake emails or websites that trick people into giving personal information, such as social security numbers, bank account and credit card info, as well as login or password information. Don’t be fooled by unexpected emails about big refunds, tax bills or requesting personal information. That’s not how the IRS communicates with taxpayers.

2. PHONE SCAMS - Phone scams are aggressive and threatening phone calls from criminals impersonating IRS agents. These phone calls often threaten police arrest, deportation, license revocation and other things. To avoid falling victim to this scam, hang up the phone! The IRS does not initiate contact by phone but by mail and would never threaten any of those things when attempting to collect taxes.

3. IDENTITY THEFT - Also highlighted at the top of the tax scam list is identity theft. Tax-related identity theft is the stealing of personal and financial data. Unfortunately there is little you can do to avoid such scams but The Security Summit Partners (IRS, state tax agencies and the tax preparation industry) have applied more safeguards against this crime and say they will continue to seek new ways to reduce identity theft.

4. PREPARER FRAUD - Return preparers fraud is when dishonest, unscrupulous tax return preparers perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Want to avoid this type of crook?

Be wary of preparers who promise overly large refunds.

Ask for the preparer’s IRS preparer tax identification number (PTIN).

Make sure your preparer offers IRS e-file.

Always review your return before signing and never sign a blank return.

5. FAKE CHARITIES - Scam artists set up fake charities to steal money and personal information. To avoid falling victim to these scam, check out the IRS website, Exempt Organization Select Check. There you can find out if it’s a legitimate organization before donating your hard-earned money.

6. GET YOUR REFUND HERE - Another scam that remains on the Dirty Dozen list from years prior is falsely inflating refund claims. Scam artists pose as tax preparers during tax time, luring victims by promising large federal tax refunds. Or they file a false return in their client’s name, and the client never knows that a refund was paid. Scammers frequently prey on people who do not have a filing requirement, such as those with low-income or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement. To avoid this scam, choose your tax preparer wisely. To help find a tax preparer with the right qualifications visit the: IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

7. EXCESSIVE CREDITS -  An individual or business may make an erroneous claim on their otherwise legitimate tax return. Or an identity thief may claim the credit in a broader fraudulent scheme.

8. PADDING DEDUCTIONS - This scam involves taxpayers falsely padding deductions, expenses, or claiming credits they are not entitled to. Signification penalties may apply for taxpayers who file incorrect returns and may also be subjected to criminal prosecution and be brought to trial for their actions.

9. FALSIFYING INCOME - This scam involves inflating or including income on a tax return that was never earned, either as wages or self-employment income, usually to maximize refundable credits. Taxpayers should ensure all the information they provide on their tax return is accurate. Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else.

10. ABUSIVE TAX SHELTERS - This scam is when unscrupulous promoters encourage the use of phony tax shelters designed to avoid paying what is owed. These scams can end up costing taxpayers more in penalties, back taxes and interest than they saved in the first place.

11. FRIVOLOUS TAX ARGUMENTS - Some of the more common arguments that taxpayers have made are that taxpayers can avoid paying taxes on religious or moral grounds by invoking the First Amendment to the Constitution or that only federal employees are subject to federal income tax. Besides having to pay any unpaid taxes, plus penalties and interest, taxpayers may be subject to a $5,000 penalty for making a frivolous argument.

And lastly…

OFFSHORE TAX CHEATING - This tax scam is attempting to hide income in offshore banks, brokerage accounts, or nominee entities, which are then accessed using debit cards, credit cards, or wire transfers, to avoid paying taxes. Other taxpayers use foreign trusts, employee-leasing schemes, private annuities, or insurance plans to evade tax. Taxpayers who do not disclose these foreign assets or accounts risk significant penalties as well as possible criminal prosecution.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at djpcapital@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

Click to enlarge this infographic.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

Click to enlarge this infographic.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

The Case for boring old “Dollar Cost Averaging”

In 2015, the stock market took us for a wild ride. For almost 8 months, the S&P 500 had barely moved (unless you consider 3% spectacular performance), range bound from 2050 to 2125.  Then, in Mid-August for a variety of reasons, the S&P fell to an intra-day low of around 1850, before bouncing back to 2100 in November.  Two months later, in mid January of 2016, the market tumbled back down to the mid 1800′s again.  

Those are huge swings in what appears to be a very undecided market. The talking heads are split between Bulls and Bears. Some say the recovery is still in tact, while others are running for the hills with full fledged calamity set to be right around the corner. 

So what should you be doing?  Well, for long term investors (20+ year time horizon), panic selling, and exiting the market, should be the farthest thing from your mind. However, I wouldn’t suggest backing the truck up either and going on a buying spree. With either approach, you lend yourself to trying to time the market, which is never a good idea. As the sayings go, patience is a virtue, and cooler heads prevail. 

Enter the boring old strategy of DOLLAR COST AVERAGING.

By following this simple practice, you can protect yourself against market fluctuations and downside risk. As depicted in the illustration above, regardless of where the market is, continue buying the same dollar amount of securities on a regular schedule. Instead of trying to time the market, or giving in to our primal, emotional instincts, shift the focus to accumulating assets on a regular basis.

Let’s use an example:

Let’s assume on January 1, you are contributing to your company’s 401(k) plan at a current rate of $100 dollars per month, in an investment fund that costs $20 per share. After 3 months in a flat market, you have invested $300 and hold 15 shares.

On April 1, for the next quarter the market drops, the Chicken Little’s are everywhere, predicting the next recession, and your fund’s share price drops to $15.  Being the savvy, stone cold investor that you are, you keep investing $100 each month. At June 30th, you have spent the same $300, but this time ended up purchasing, 20 shares of the fund.

From July through September, the market is still down, but has flattened out and the selling seems to have subsided; your fund is trading at $12. At the end of September, $300 has bought you 25 shares.

Finally, from Labor Day through New Years Eve, the market spikes and the Santa Claus rally is in full effect. Amazon ships billions in products, people wait in tents in the snow after Thanksgiving for meaningless gifts, it’s retail mania!!! Your investment fund is trading in this time period back up to $20 per share. Your $300 buys you 15 more shares.

So, where did we end up?

After spending $1,200 at our constant, steady pace, regardless of price, we ended up with 75 shares, at a cost basis of $16 per share. At the current price level, we are sitting comfortably on an unrealized gain in our portfolio of $300 or 25%! 

By deploying this strategy, we were effective in the lost art of “buying low”, using our long time horizon to our advantage. The market gyrations, may have spooked others into making untimely decisions, but we held firm in our strategy. In next week’s edition, we will examine how to properly perform a Re-balance on your account, and how that translates into “Selling High”.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

TOP 10 Year-End Financial Moves! 

Everywhere you look in December, there is a “top 10″ or “best-of” list, whether it’s music, people, fashion or finance. So why not read one more list that will actually help you in your life, instead of being angry at Time Magazine, for not picking your favorite he/she as person of the year. 

1. ID THEFT 

Tis the season for stealing accounts and information. No matter how many different features are added to our credit card accounts, always be mindful when making transactions. Don’t save card information at websites you don’t trust. Don’t give out your personal information over the phone, and be careful when shopping in stores. Apple Pay is extremely safe, but it only works to its potential if you protect your device! A simple passcode, or timely wiping a lost phone can make all the difference. 

2. COMPANY BENEFITS 

Are you taking advantage of your company perks? I’m not talking about the free coffee. I’m talking about the discounted gym membership for that all important New Years resolution coming up. Or making sure you spend all your FSA money because those accounts are “use it or lose it.” Or participating in stock purchase plans or retirement plans. 

3. PERSONAL BUDGETING / MONITORING 

It might seem weird that a financial advisor would be pushing potential clients to use other services, but I believe my value goes way beyond just crunching data. So I trust companies like Mint and Personal Capital which have great platforms to get you on track with your budget and show you real time views of your net worth and spending habits. Personal Capital is exceptionally great for tracking your investment balances that may be scattered across multiple brokerages. 

4. EDUCATION 

Some people say the best investment you can make is in yourself. Well, when looking towards the end of a year, it’s good to take a step back and decide if you have any plans or goals for the coming year you may need more training or education to accomplish. If so, there are still tax credits that could be claimed for education and training programs, as well as tuition reimbursement at many corporations. 

5. HAVE THE TALK 

No not that one, not the awkward one with your teenage son/daughter. The other one. The statistics for divorce brought about by finance related issues is astounding and makes it critical to sit down with your spouse/partner to ensure you have aligned your goals. What home renovations can you accomplish in the coming year? What savings target do you want to reach for this year? Will the 210,000 Odometer reading on the Chevy Malibu really only need some oil and a car wash next year? 

6. CLIMB OUT OF DEBT

It’s never good to have a load of consumer debt hanging over your head. Now more than ever though, with the federal reserve set to raise interest rates, it is important to reduce and eliminate your debt burden. 

“Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.” - Albert Einstein 

7. IMPROVE YOUR CREDIT 

Have you been a victim of Identity Theft. Have you been reducing debt balances? Have you checked your credit score lately? It is always good to check your credit to protect against anything unusual and keep your borrowing potential in excellent condition. 

8. DO YOU HAVE THE RIGHT INSURANCE?

Do you have life insurance? Do you have homeowners insurance? Do you have health insurance? Make sure you aren’t spending a fortune on life insurance that you may not need, and make sure your insurance is in fact insurance! Many people like to sell products that have investment characteristics. If you want an investment, enter the stock market, if you want insurance, get insurance. For property, it rarely makes sense to insure the land, so make sure you aren’t paying for coverage that is in great excess of your structure and belongings. For medical, Obamacare penalties are only going up, so ensure you have coverage, or else! If your company offers an HSA plan, it may be beneficial to enroll. Unused funds contributed can be carried forward to future years when you may need it. Contributions to these plans are pre-tax and can be a great supplement to Medicare during retirement, if invested and rolled responsibly over time. They can also be withdrawn as taxable assets in retirement, allowing your true retirement portfolio to continue to grow without reductions from withdrawals. 

9. REBALANCE & MAX 

At least annually, your investment and retirement portfolios should be reviewed to determine whether your overall investment objectives are still being met. By methodically re-balancing you also remove emotion from your investment decisions, which is the single hardest obstacle in investing, and allows you to actually buy low and sell high. What a concept. Additionally, if your company matches 6% to your retirement plan and you are contributing less than that or nothing at all, please schedule an appointment with me, you may be my most profitable client in history!!! 

10. GO TO THE SUPERMARKET 

I, myself, am sick of the, overused-to-the-point-of-vomiting phrase, “if only you didn’t spend $3.99 a day on that Starbucks, you’d have blah blah blah left to save every month, etc”…However, cooking at home is undoubtedly cheaper than eating out, healthier (depending on your choices), and allows for family bonding time where you can sit down and discuss the first 9 items on this list!

As always, thanks for reading!  See you next week.

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.

[finance411-blog]

Student Loan Debt Impact on Retirement

In this week’s edition, we’ll explore the impact student debt has on an individual’s retirement, using my actual current situation for the data.  A recently published article from ThinkAdvisor puts a 30k debt burden as having a $325k impact on retirement.  For those of you with an attention span shorter than two minutes, I’ll get this out of the way, rather than save it until the end, Happy Thanksgiving, I hope you all get to enjoy the day with your families.

Now, Some readers may think it is odd that I’d want to use my own data and air my own “dirty” debt laundry, however I view it in a different light.  Just because I didn’t have the resources at the time to pay for college without debt, does not mean that the knowledge and resources I’ve obtained since then, would lead me to make the same choices. It is through this experience that I can ensure I will do everything I can so that my children are equipped to navigate these decisions with much more information than I had.  I hope the same holds true for you and that this post creates actionable, practical ideas so that you can look to eliminate your own debt or minimize the use of debt for your children.

The Case Study

Back in 2005, before the iPhone was invented (remember this),

and when Facebook was 2 years old, I graduated from a private, 4 year university in the well protected bubble of Westchester County, New York. I was a division 1 athlete with a partial scholarship, and although my parent's house was 15 minutes away, I still chose to dorm at school, for the convenience and experience.

Even with help from my parents and my small scholarship, I left school with a loan balance just under $60,000.  And by no means was I on the super senior schedule either. I graduated on time, with a degree in public accounting, 4 years after I started.  

One of the biggest issues, in my opinion, with student loans is that a loan issued your freshmen year starts accruing interest on day 1. However, you don’t start paying your loans back until 6 months after graduation in most cases. That daily compounding for 4 years, is lucrative for lender’s wallets, but by the time you make your first payment your original $15,000 loan (assuming 5% interest) could have a balance north of $18,000.  

So let’s assume by getting that degree the experts are right and you end up better off down the line regarding your potential future earnings, is it truly a ride off into the sunset or is the devil in the details?

Let’s Run the Numbers!

Starting January 2006, I was required to pay roughly $580 per month on my loans, which was reduced to $350 per month starting in 2015, through rate reduction and refinance, with a final payment set for 2025.

As of this writing, I have paid a whopping $66,500 in principal and interest, and for that, my $60,000 loan balance has only dropped to $40,000. More on that in a later post!

So, for all you math whizzes out there, $66,500 divided by 10 years, equates to $6,650 per year in U.S greenbacks that could have been better “spent” as contributions to my 401(k) plan. Instead they went to that filthy $^@&&*, Sallie Mae.

Wait, how much would that have been worth?!

Using a simple calculation in Microsoft Excel, as of today, those payments, if invested, would have grown to a balance of $102,500 (assuming a rate of return equal to the S&P 500).  That is almost double your money, which includes being invested in the market during the worst recession the U.S. has seen since the Great Depression (2008 rate of return was -38.50%).  

Carry that balance forward for 35 more years, which is when I plan to retire, assuming no other contributions and a rate of return of 5%, and that balance grows to over $565,000.  Yes I will repeat that, over a half of a million dollars in my retirement has been lost to these wretched student loans.   

To make matters worse, this does not even take into consideration the pre-tax nature those retirement contributions would have qualified for, compared to the after-tax student loan payments of which only the interest portion (which is also capped and phased out) is deductible.

“Knowing Is Half The Battle”

By illustrating the effects debt/payments have on retirement, I’m more certain than ever, that I’ll be more prepared to guide my son through these decision’s than ever before.  I hope this information is helpful and can help create awareness about how we use debt in our lives.

As they used to say in the old G.I. Joe cartoons, “Knowing is half the battle.”

Joseph Passaniti, CPA is the founder of DJP Capital Advisors LLC a New York State registered investment adviser and can be reached at jpass@jptax1040.com

Disclaimer: Nothing in this article should be construed as tax advice. Although this information has been obtained from sources which we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not indicative of future results, while changes in any assumptions may have a material effect on projected results.