Here are 5 Better Ways to Donate to Charities in 2022 – And Cut Your Tax Bill

By Michael Torney, CFP, J.D., LL.M.

Despite the stock market’s recent downturn, most people will plan this year to donate money to their favorite nonprofit organizations. But with nearly everyone taking a closer look at all of their expenses, it may also be a good time to re-examine these charitable contributions – and particularly the tax benefits a person can receive.

With the 2021 tax year now behind us, here are five easy ways to continue helping your favorite nonprofit organization while making the best use of tax strategies in 2022:

Don’t Give Cash

Changes in the federal tax laws in recent years have raised the standard income tax deduction. Unfortunately, this has made it more difficult for a person to reduce their taxes owed by writing a check since many people are better off taking the standard deduction than itemizing deductions on their returns. For 2022, the standard deduction is $12,950 for single filers and $25,900 for couples. In 2020 and 2021, there were special tax deductions for non-itemizers that gave cash contributions to charity, but that deduction is not available in 2022. If you plan to give away a few thousand dollars, it probably doesn’t make sense to give cash, so look for other ways to make this gift.  Below are a few alternatives.

Bunch Your Donations into One Tax Year

If you usually give $5,000 each year, consider giving $15,000 in 2022. By doing so, it may be allow you to receive a tax benefit for your donations, by making your total itemized deductions larger than your standard deduction. For instance, if you anticipate larger than average medical expenses, this amount can be added to common deductible items, which include state and local income or sales taxes, real estate taxes, personal property taxes and mortgage interest. Combined, these expenses may make itemizing deductions a better way to go.  

Donate Stock That’s Appreciated

There are several key advantages for investors who donate some of their long-term, appreciated stock holdings from an after-tax investment account. By contributing this stock to a charitable organization, you pay no taxes on the gains from the stock. At the same time, the charity receives the full value of the gift and your charitable deduction is usually based on the fair market value on the date donated.

For example, shares of Apple Inc. hit a high of $44.10 in 2017, nearly one-fourth of its recent high. If If an investor purchased shares at that price and sold 100 shares this year for $151.10, they could donate the proceeds to charity, but then they would need to use other cash to pay tax on the $10,700 capital gain. Instead, the investor could donate the 100 shares of Apple directly to the charity and avoid paying the tax on the gain since purchase. This strategy makes sense for anyone that would need to sell the stock eventually, since it permanently avoids paying tax on the gain.

Consider a Donor-Advised Fund (DAF)

This fund allows one to contribute cash, stock or other assets and receive a full tax deduction in the year of the gift while making grants to charities that can be spread out over several years.

You can combine this strategy with the bunching strategy and the appreciated stock strategy. This year, one of our clients chose to fund five years of charitable contributions to the donor advised fund – bunching allowed her to itemize her deductions. This money can remain in the fund and be invested appropriately over the next five years.

In addition, she contributed appreciated stock from 15 years ago and saved herself the 20% of capital gains tax she would have paid on the stock. The icing on the cake?  She can contribute cash to the investment portfolio, buy the stocks again, and reset her basis.

Once the DAF is set up, making donations is easy.  Many clients simply send us an email with the name of the charity and the amount to be donated. We handle the contribution from there and send a follow up email when the gift is completed.

For Those 70.5 and Older, Consider a Qualified Charitable Distribution (QCD) Strategy

A QCD is simply money that can be transferred from your retirement accounts, such as an Individual Retirement Account (IRA), to a charity. And because people are required to withdraw a minimum amount from these accounts at age 72, using a QCD to do it will save money on your tax bill.

Here’s how it works. If a person is required to withdraw $100,000 from their taxable accounts this year, they will pay taxes on the entire $100,000. However, if a $20,000 contribution is made through the QCD, they only owe tax on the remaining $80,000 – a savings of several thousand dollars.

As you consider one or more of these strategies, it may also be a good time to re-examine these charitable contributions — the amount of the donation, the organizations receiving your money, or both.

For example, you may have lost touch with key leaders at your one-time favorite charity, or one of your children would prefer to begin support other organizations. Taking time to address these issues will help determine if you are still meeting the goals you’d like to accomplish with your contributions.

If you have questions about your charitable giving and need to discuss a tax strategy, our team can be reached at duffteam@monetagroup.com. We offer a free consultation to ensure we meet your philanthropic goals while saving money on taxes.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only, based on generic assumptions. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Here are 5 Better Ways to Donate to Charities in 2022 – And Cut Your Tax Bill appeared first on Moneta Group .

source https://monetagroup.com/blog/here-are-5-better-ways-to-donate-to-charities-in-2022-and-cut-your-tax-bill/

Moneta Moment – How to React When the Market Declines

David Wickenhauser  | Investments Strategist

As the S&P 500 inches closer to bear market territory, our Investments Strategist David Wickenhauser takes this Moneta Moment to discuss how investors can keep their emotions in check when reacting to volatility in public equities.

Anxiety or regret can lead to impulsive reactions, creating long term consequences that negatively impact financial goals. To maintain peace of mind when the market declines, investors should set realistic expectations and remain disciplined.

Wickenhauser ends the video by encouraging investors to take advantage of market declines by rebalancing to a predetermined, long-term asset allocation. Talk to your Moneta advisor about what this could look like within your specific portfolio and circumstances.

 

The post Moneta Moment – How to React When the Market Declines appeared first on Moneta Group .

source https://monetagroup.com/blog/moneta-moment-how-to-react-when-the-market-declines/

Ask the CFP: How do 529 College Plans Affect Financial Aid?

 

Hello everyone and welcome to this month’s Ask the CFP segment. This month’s question is, “How do 529 college plans affect financial aid?” While many of our clients aren’t focused on financial aid opportunities due to their incomes or assets, some do wonder how assets such as 529 plans affect financial aid for grandchildren or if a child were accepted into a very expensive college. For example, the University of Chicago estimates the cost of attendance for on-campus students around $82,000 per year. That’s about $330,000 for four years without inflation for one child. Add a sibling or two into the equation and it’s worthwhile discussing this topic.

529 college savings plans offer potential deductions on state income tax as well as the ability to invest the dollars tax-deferred over time. If using on qualified education expenses, 529 assets can then be distributed tax-free. So what happens to financial aid opportunities, such as grants and Federal loans, if someone saves well to a 529 plan? When applying for financial aid, a student or parent completes the FAFSA form, which is administered by the US Department of Education. Depending on the college, another form called the CSS may also be required. The FAFSA and the CSS each ask about the incomes and assets of students and parents. This information is used to determine something called the Expected Family Contribution. It’s the amount of money the FAFSA or CSS determines your family is able to pay for college in a given year.

The FAFSA and CSS treat assets such as savings accounts and non-retirement investment assets as available to spend on college. However, the rate applied to cash and investments is different with each form. With FAFSA, up to 5.64% of these assets are counted in the Expected Family Contribution, while the CSS uses a rate of 5%. In other words, parents with $100,000 of cash or investment assets would have up to 5.64% of those assets, or $5,640, counted in their Expected Family Contribution with FAFSA.  When it comes to 529 plans owned by parents, they’re treated the same as cash and non-retirement investment assets. In other words, they don’t “hurt” the chances of financial aid any more than saving up cash in the bank. Instead, 529 plans offer potential tax advantages other savings vehicles can’t offer for education expenses.

When a grandparent owns a 529 plan, the rules are a bit different. Grandparent-owned 529 plans aren’t treated as part of the Expected Family Contribution for the FAFSA, but they are for the CSS form. Also, while grandparent-owned 529 plans are treated favorably for the Expected Family Contribution with FAFSA, once assets are distributed from a 529 plan from a grandparent to a student, that income must be declared on the FAFSA. In other words, 529 dollars coming from grandparent to grandchild to pay for college appears as income in the name of the student, which is assessed at 50%. This can greatly reduce financial aid opportunities, but there are ways to manage this based on when the dollars begin coming out of the 529 plan.

Overall, the financial aid system is a bit complicated, but when it comes to 529 plans, I feel they’re a great planning tool for college. In other words, I’ve never recommended against a 529 plan for financial aid reasons.

If you have a question about this topic or have a question for next month’s video, please send it to Dtroyer@MonetaGroup.com. Thanks for watching and we’ll see you next month.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Please speak with a qualified tax or legal professional before making any changes to your personal situation.

©2022, Moneta Group Investment Advisors, LLC. Trademarks and copyrights of materials referenced herein are the property of their respective owners. These materials have been prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Past performance is not indicative of future returns. You cannot invest directly in an index. These materials do not constitute an offer or recommendation to buy or sell securities, and do not take into consideration your circumstances, financial or otherwise. You should consult with an appropriately credentialed investment professional before making any investment decision.

The post Ask the CFP: How do 529 College Plans Affect Financial Aid? appeared first on Moneta Group .

source https://monetagroup.com/blog/ask-the-cfp-how-do-529-college-plans-affect-financial-aid/

The Stock Market is Selling Off. Here’s Why It May Make Sense to Invest in Stocks Now

By Ryan Martin & Lauren Hunt, Senior Advisors

The stock market is off to a rocky start in 2022.  After rewarding investors with strong growth during the past several years, the Standard & Poor’s 500 Index has lost approximately 13% percent of its value through the first four months of this year. The combination of rising interest rates, inflation’s impact on prices and the continuing war in Ukraine is dragging down the prices of just about every publicly-traded company.

But instead of selling stocks or letting idle cash sit, now is an opportunity to consider investing.  We can appreciate that buying into equities now sounds a bit puzzling – pretty much like placing your hand on a hot stove.  But here’s where the old axiom “buy low, sell high” comes into play.  Think about it like this:

When any of us makes a large purchase, such as airline tickets or a new car, we scour the internet for the best price. At times, we wait days or weeks for a sale. Why not consider the same strategy when buying stocks and purchase after they’ve gone down in price?

History bears out this argument. A good example is the recovery that occurred following The Great Recession of 2008-2009.  After the Dow Jones Industrial Average hit a low of 6,400 on March 9, 2009 – nearly a 50% decline from its previous high – it quadrupled in value over the next 10 years.

We know that a plunging market can make investors feel skittish. For example, when the onset of COVID-19 shut down the country in the spring of 2020, one person directed us to liquidate millions of dollars in their stock holdings. As we know, the market recovered swiftly and this investor missed out on the spectacular gains of that recovery.

So, how should someone take advantage of this situation? Here are a few potential paths to consider.

Younger Investors – Keep Doing What You Are Doing

For someone in their 30s or 40s who is diligently putting 10-15 percent of their paycheck into their 401k retirement plan every payday, the plan is the same: keep making your periodic investments and over time, it will add up.  In addition, if you get a pay raise and can comfortably meet your expenses, consider adding another 1-2 percent of your pay to the 401(k) plan. You are investing for a retirement that is 20-30 years away, so forget about today and focus on the long-term big picture.

For Those Nearing Retirement – Don’t Panic

Investors planning to retire in the next few years may look at the falling value of their portfolio and consider reducing their equity investments. However, while trimming stocks will make a portfolio less volatile, it could also lock in recent losses and make it more difficult to recover in the future. And, if inflation remains high, you will need more growth from a portfolio to maintain a desired standard of living in retirement.

We help these and other clients weather this storm by rebalancing their portfolios to fit their long-term objectives. This means realigning the weighting of stocks, bonds and other assets in a person’s portfolio. In today’s market, we not only make adjustments to maintain the proper balance between stocks and bonds, but also within an individual’s stock portfolio. Given the performance of different market sectors in recent months, growth-oriented stocks have taken a back seat to value style holdings, and we may rebalance their equity holdings to achieve a better balance between the two categories.

Have a Strategy for Your Cash

Many investors seek a safety net during tough times — and that often means holding onto their cash. While this strategy may seem logical, there is a downside. With the consumer-price index rising by more than 8% recently and most banks paying less than 1% a year in annual interest, people lose considerable spending power by holding a lot of cash.

Instead, we often help clients develop a plan that puts their money to work gradually. Called dollar-cost averaging, this strategy enables an investor to divide the total amount to be invested over a specific period. For example, if someone has $500,000 to invest, we may ask them to take 25 percent — $125,000 – and put it work now.  Then, we work with them to develop a schedule to invest the remaining amount.

While we can’t time the market’s performance, nor predict what will happen next, recent history shows that it doesn’t necessarily pay to try and time the markets. The Standard & Poor’s 500 Index returned an average of 8.3% annually from 2002 through 2021 if a person was invested every single day. For those who missed the market’s best 10 days during this stretch – just 10 days – the S&P returned just 4.2% annually. Even more dramatic, for a person who missed the best 40 days, the S&P index actually fell by an average annual rate of 2.7%.

Even though it could be a difficult environment for stocks for the next few months, keep the long-term performance of the stock market in mind. And, remember that each investor’s portfolio is built to withstand the stress of a difficult period.

If you have questions or need to discuss your investment strategy, feel free to contact us at rmartin@monetagroup.com or lhunt@monetagroup.com. We offer a free consultation to discuss how a comprehensive financial plan can enable your business and personal wealth to grow.

These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Index and/or Style returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. You cannot invest directly in an index. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post The Stock Market is Selling Off. Here’s Why It May Make Sense to Invest in Stocks Now appeared first on Moneta Group .

source https://monetagroup.com/blog/the-stock-market-is-selling-off-heres-why-it-may-make-sense-to-invest-in-stocks-now/

How do I invest for high inflation?

 

After an extended period of very low inflation, 2021 welcomed:

• The broad distribution of the COVID vaccine
• Additional stimulus
• A booming economy
• Supply chain issues
• A tight job market, and
• The first signs of above-average inflation

The latter issue was compounded in early 2022 by the Omicron COVID variant, which caused worker shortages as illness and mandated quarantines spread throughout the country. Investors want to prepare for the road ahead, which could include even more inflation.

At Moneta, we commonly implement four strategies to protect the portfolio:

• First, we want to maintain a healthy allocation to diversified stock investments which provides returns higher than inflation over time.
• Second, we want to retain enough cash for anticipated and extraordinary cash needs but not much more.
• We may complement traditional fixed income with high yield bond investments.
• Lastly, some investors incorporate real estate, infrastructure, or Master Limited Partnerships into the portfolio for inflation hedge.

Two more strategies are often used by investors as inflation hedges but a word of caution should be noted.

• Commodities (gold, oil, soybeans etc.) may do well as prices increase but are extremely volatile and may be too risky for many investors.
• Treasury Inflation Protected Securities (or TIPS) were designed to protect against inflation. However, these bonds are currently expensive and incorporate a high expectation for inflation.  If inflation turns out to be lower than the market expects, an investor may suffer small losses in these bonds even when held to maturity.

At Moneta, we strive to build all weather portfolios that outpace inflation over time.  If you have more financial questions, don’t hesitate to ask your Family CFO.  We do more so you can too.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. This is not an offer to sell or buy securities, nor does it represent any specific recommendation.  You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post How do I invest for high inflation? appeared first on Moneta Group .

source https://monetagroup.com/blog/how-do-i-invest-for-high-inflation/

CIO Moneta Moment – What Now for Inflation?

Aoifinn Devitt | Chief Investment Officer

Inflation levels have steadily risen to 40-year highs and Moneta Chief Investment Officer, Aoifinn Devitt, is here to discuss what that means for you and your portfolio.

Inflation is now broad-based, driven by the pandemic supply chain shortages and excess money supply created by central bank action. These inflation trends are globally based. A significant component of inflation in US, United Kingdom and Euro Area has been created by excess consumer spending and less saving than seen in areas such as Japan.

Devitt ends the video by reminding investors of what can protect their portfolio against inflation: real estate, real assets, equities (in the long-term), and bond ladders.

 

The post CIO Moneta Moment – What Now for Inflation? appeared first on Moneta Group .

source https://monetagroup.com/blog/cio-moneta-moment-what-now-for-inflation/

Investment Team Update – Nowhere to Hide

Aoifinn Devitt | Chief Investment Officer

As we write, markets are in the middle of a broad-based retreat, and this week started with the worst day in global markets since 2020. While technology and high growth sectors have been in the crosshairs of investor disdain all year, the current equity sell-off has been indiscriminate, and has included the energy sector. Ongoing stringent Covid lockdowns in China and faltering economic growth have sparked concerns of a more severe global slowdown, causing the price of oil to falter (as we write it is at $106, down 6% on the day.)

Investors are grappling with a chaos of concerns, which today include the highest inflation in years, rising interest rates, supply chain restrictions driving higher prices and constraining demand, tech stocks past their pandemic peaks, geopolitical turmoil, and the uncertain legacy of Covid and its variants.

While that list of woes is not exhaustive, dealing with them is certainly exhausting, and investors fled stocks, bonds, and risk assets as sentiment turned decidedly more sour since the Fed meeting of last week. Commentators spoke of “capitulation” and “throwing in the towel” while the market conditions were likened to the “sum of all our fears.” Markets have been markedly more volatile and fragile since the end of 2021, when, it should be remembered, markets were setting multiple all-time highs in a single month. The cascade of economic surprises that 2022 has brought has simply been more than many investors can bear.

As bonds and stocks moved in the same direction and portfolios were bruised on all sides, it does indeed seem that there was “nowhere to hide” in recent weeks. Cryptocurrencies – a bellwether for risk appetite – also sold off (with the market down $1.6 trillion since its November high), while REITS – an equity proxy for real estate – were caught in the general equity sell off and sold off in line with the market.

Source: Bloomberg as of 05.09.2022. The S&P 500 Index is a free-float capitalization-weighted index of the prices of 500 large-cap common stocks actively traded in the United States. The Bloomberg U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. You cannot invest directly in an index. See important disclosures at the end of this article.

 

With sentiment so roundly negative, it seems that the market neither wants to have its cake, nor eat it. Career bond investors call the end of the bond bull markets and expect a steadily rising rate environment – but other forecasters are also foreseeing an economic slowdown. Why would we expect global central banks to blindly follow a rate rise trajectory if growth is sluggish? Unless of course, inflation becomes unstoppable – but won’t slower rates of economic growth choke off some of the demand that drives prices higher?

So, with “nowhere to hide,” what do we know? At the current levels of volatility, timing market entry and exit is challenging – a well-balanced core equity portfolio will have sold off in unison, but as some of the investor fear subsides and markets return to fundamentals, areas such as dividend paying stocks, consumer staples, and utilities – these should start to recover.

Despite the overwhelmingly negative tone in markets today, the fundamentals around consumer sentiment, employment, and the probability of a recession are all positive. As of May 9, 2022, bond markets have endured their worst performance in a year since 1842[1], according to the Wall Street Journal, and with the 10 year Treasury note trading at over a 3% yield and investment grade bonds currently trading at levels last seen after the global financial crisis, some bond experts are seeing attractive yields and buying opportunities. Even during the depths of Covid slowdowns, default rates never ticked upwards, and it would seem unusual that this environment should see more turmoil than at that time.

Today, assessing investor sentiment, the glass is half empty. It may feel uncomfortable, hopeless, and unsettling. In times like this, we advise patience and a return to long term investment principles such as long-term thinking, diversification, and taking advantage of market conditions to selectively tax-loss harvest and rebalance on schedule. One characteristic of periods like this is that they feel like they will last forever. They do not.

[1] https://www.wsj.com/articles/its-the-worst-bond-market-since-1842-thats-the-good-news-11651849380

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved.  These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index and/or Style returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax, or legal decision. You cannot invest directly in an index. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Investment Team Update – Nowhere to Hide appeared first on Moneta Group .

source https://monetagroup.com/blog/investment-team-update-nowhere-to-hide/

CIO Moneta Moment – Market Volatility

Aoifinn Devitt | Chief Investment Officer

The war between Russia and Ukraine, historic inflation, rising interest rates and concerns about the economy’s resilience have all contributed to the volatile start in 2022 for equity markets.

While Moneta’s Chief Investment Officer, Aoifinn Devitt, expects that volatility to remain until the end of the year, she discusses in this video how current money market funds suggest that strong buying power remains on the sidelines and may provide support.

 

The post CIO Moneta Moment – Market Volatility appeared first on Moneta Group .

source https://monetagroup.com/blog/cio-moneta-moment-market-volatility/

Breckenridge Spring 2022 Newsletter

Please enjoy as Dave discusses a few recent breakthroughs that give him hope and excitement about the future. Kevin’s “Ask the Professional” answers the question, “What can the Breckenridge Team do for you?” And last but certainly not least, Karleigh wraps things up with an update on what the team has been up to this year.

©2022, Moneta Group Investment Advisors, LLC, 100 South Brentwood Blvd., St. Louis, MO 63105. This is an advertisement. These materials have been prepared based on materials deemed reliable, but the accuracy of which has not been verified. Past performance is not indicative of future returns. You cannot invest directly in an index. These materials do not constitute an offer or recommendation to buy or sell securities, and do not take into consideration your circumstances, financial or otherwise. You should consult with an appropriately credentialed investment professional before making any investment decision. Trademarks and copyrights of materials linked herein are the property of their respective owners. 

The post Breckenridge Spring 2022 Newsletter appeared first on Moneta Group .

source https://monetagroup.com/blog/breckenridge-spring-2022-newsletter/