The Impact of Emotion on Financial Decision-Making

In this episode of Beyond Investments, Seth Leishman and Rick Fisher discuss the impact of emotions on financial decision-making. This is our first episode recording in our offices (not at KNCO) with our own equipment! Let us know what you think.

Managing Your Taxable Investments

By Frederick “Rick” Fisher, MS, CFP®, CA Insurance Lic#OC90003

First published in The Union | Download the PDF

As a full-service financial planning firm, we address many issues regarding our clients’ finances. For example, over the years, we have advised many clients on how best to manage the tax ramifications of repositioning a taxable portfolio. Unlike changes in qualified retirement plans and IRAs, recommending changes in taxable accounts can be complicated when significant gains and/or losses are involved. 

Investors need to weigh the costs and benefits of the transaction. When a gain is involved, the main benefit is realization of the gain and possible protection of that gain, with the ability to reinvest or spend some of the money that is freed up by the sale. The cost, however, is the taxes that will need to be paid on that gain. The good news is that the tax is based on the gain on the sale and not on the total proceeds. In addition, the rate on capital gains is generally lower than the rate on other types of income, such as salary which is taxed at ordinary taxes rates. 

To illustrate, we will take the hypothetical case of George and Gina Stewart. They are in their early 60s and in the final push for retirement. George currently has stock from his previous employer that he obtained through options that were granted him. He was able to buy 5000 shares of stock at $5 per share and now, 10 years later, they are worth $80 per share.  Up until now, the Stewarts had resisted selling any stock because they were both still working, did not need the income, and wanted to defer paying taxes on any gains till they needed the money during retirement. Now that retirement was nearing, they wanted to come up with a plan to turn those appreciated shares into cash while minimizing the tax ramifications. 

Our first step was to calculate what the gain would be if stock were sold today. Currently, that would be $75 per share of stock sold.

Second, we charted out cash flow needs over the next 5 years. When would they would be eligible for Social Security and other pensions? The issue now was when to sell. If we sold all today, we would have an enormous gain of $375k and a potential tax bill of $75k. However, the Stewarts would still net $325k ($400k-$75k), a nice return on a $25k investment. The couple still liked the stock and saw no need to sell it all now, but we were not guaranteed that the stock would continue to grow and worried about the stock falling sometime within the next 5 years.

Upon review of their other holdings, we noticed that some smaller positons had losses. Since you can offset gains with losses, we looked at possibly selling just enough shares to take advantage of the losses and minimize the capital gains taxes. We also discussed putting upper and lower limits on the stock price where we would sell some to lock in gains and minimize losses. 

In the end, we came up with a plan to trim the stock over the next 5 years, which would give the Stewarts the cash they need during retirement and minimize the tax effects of the sale. 

When it comes to investing, once must always consider taxes when evaluating a taxable portfolio and come up with a strategy to mitigate them. Protecting gains by selling high may leave you with more money than selling when the stock falls.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor.

Frederick Fisher is a Registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC.  Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial.  

For questions or suggestions, contact Frederick at (530) 273-4425, or frederick.fisher@lpl.com, or visit ostrofefinancial.com.  Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.

Buying a Car?

In this episode of Beyond Investments, Seth Leishman and Rick Fisher talk about the financial aspects of cars. This is a topic that we have discussed before (a few years ago), so we thought it would be fun to bring it back up, especially as there are many end-of-the-year promos going on.

Beyond Investments with Rick Fisher

Tune in to Beyond Investments on KNCO! This episode is a conversation between Seth Leishman and Rick Fisher.

Roth IRA or Traditional IRA: Which is Better?

By Frederick “Rick” Fisher, MS, CFP®

Download the PDF or read this article on The Union

Over the years, we have had many clients ask, “Which should I invest in, a Roth IRA or traditional IRA?” They both are excellent retirement vehicles and generally can be invested in almost any asset. To illustrate the differences and determine which one is more appropriate, we will take the case of hypothetical clients, Jim & Sally Jones, and Roger Stevens.  

Jim and Sally are a young couple starting out. They want to get an early start on retirement savings. Neither of their employers offer a retirement plan, so both are eligible for the tax deduction from a traditional IRA. 

In order to determine which IRA is better for them, we needed to know their income and tax bracket. Since they are just starting out, their salaries are relatively low, and taxes are of secondary concern. In their case, a Roth IRA may be the better way to go, even though a Roth IRA contribution is not tax-deductible, while a traditional IRA is tax-deductible. The major benefit of a Roth IRA, however, is that under current law you are not taxed on distributions in retirement. Therefore, when they retire in 30 years, they will be able to start drawing on this account without an effect on their income tax. Assuming that income taxes will increase over time and that their income will be higher at retirement, this may be a significant benefit. 

 While the traditional IRA and Roth IRA both grow tax deferred, the main difference between the two is that you get the tax benefit upon contribution for the traditional IRA, and upon distribution for the Roth IRA.  

Also, the contribution limits are the same. For 2019, the max you can contribute is $6,000 for those under 50 years old and $7,000 if you are 50 or over. There are income limits on Roth IRA contributions.  For single filers the income limit is $137k Modified Adjusted Gross Income (MAGI), and for joint filers that increases to $203k. 

For the Jones, this was not a concern. For Roger Stevens, it was. 

Roger is 42 and investing in a new business that expects to make him between $120k and $150k this year. He likes the idea of tax-free income, because he has significant money in a 401(k), which like traditional IRAs, will be taxed upon distribution. He would like to have some flexibility regarding the tax treatment of retirement income.  

We advised him to wait to determine his taxable income for this year and see if he qualifies for the Roth IRA.  If not, he could still add to his traditional IRA, along with other plan options that are available.  Since both plans allow prior year contributions up to April 15 of the following year, that buys Roger some time to make a decision. 

Another advantage of the Roth IRA that both the Jones and Roger liked was that they are not forced to take money from the Roth IRA at 70½. They are forced, however, to take from a traditional IRA and most other retirement plans.  

With this information, the Jones started Roth IRAs for themselves. Roger decided to wait to see where his MAGI for 2019 will be. If possible, he would then open a Roth IRA. If not, he would add to his existing traditional IRA. 

Should you want advice on how to best allocate your tax advantaged retirement dollars, call our office for a complementary review.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax.  Future tax laws can change at any time and may impact the benefits of Roth IRAs.  Their tax treatment may change. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.  This is a hypothetical situation based on real life examples.  Names and circumstances have been changed.  To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.

Frederick Fisher is a Registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC.  Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial.   

For questions or suggestions, contact Frederick at (530) 273-4425, or frederick.fisher@lpl.com, or visit ostrofefinancial.com.  Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.

Tax Changes for 2018—The Good, Bad, and Ugly

By Frederick “Rick” Fisher, MS, CFP®

Download the PDF or read it on The Union

With the end of the year quickly approaching and a number of new tax changes coming into effect in January, now is a good time for some year-end tax planning.  

The good news is that if you make $150k or less, your taxes most likely will go down, primarily due to the standard deduction rising from $12k-$15k (depending on age) to $24k-27k. The bad news is that some widely-used miscellaneous deductions are no longer allowed: these include such items as tax preparation fees, non-reimbursed employee expenses, union dues, and investment expenses.  

Depending on how you have used deductions in the past, this could be a saving or an increase in your tax liability. For high-income earners and those who live in expensive neighborhoods, the ugly reality may be the limiting of property tax and CA state income tax deductions. Last year, those deductions were unlimited, but for 2018 the maximum you can deduct for both items is only $10k. 

To illustrate, imagine a married couple that makes $200k and owns a home valued at $600k. In 2017, they may have paid and deducted $26k in combined property and CA state tax. In 2018, however, they would only be able to deduct $10k, which in reality is a tax increase of over $4k for 2018. 

In the 1960s, the alternative minimum tax was created to ensure that very high-income earners paid a minimum tax regardless of the deductions they took. Unfortunately, by the 1990s, the tax was starting to affect the middle class and increasing their effective tax rate. Congress has finally addressed this issue by limiting its effect on only those who have $1mm in income or higher.  There may be a benefit for those with children, as the child tax credit is increased from $1k-2k per child. In addition, the benefit will be available to more households as the income limit phase out increases from $75k-$110k to $200k-$400k.  

How the 2018 tax changes will affect you will vary on your income and employment status.  For most taxpayers, the effects will be positive. In addition to being aware of the changes is to take the time and do some year-end tax planning, including calculating your year-to-date income and making sure your withholding and/or quarterly tax payments are on target. Another planning task is to estimate any gains and losses taken through the year to see if the net is a gain or a loss, and how that may affect your income.  Lastly, check your charitable contributions for the year and make any adjustments based on your tax liability.  There are many 2018 tax changes that are unique in specific aspects; to see how you may be affected, contact your tax preparer or call our office at 530-273-4425 and take advantage of the beyond investments approach.

This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor.

Frederick Fisher is a Registered Representative with, and Securities offered through LPL Financial, Member FINRA/SIPC.  Investment advice offered through Ostrofe Financial Consultants, Inc., a Registered Investment Advisor and separate entity from LPL Financial.   

For questions or suggestions, contact Frederick at (530) 273-4425, or frederick.fisher@lpl.com, or visit ostrofefinancial.com.  Branch address: 420 Sierra College Drive, Suite 200, Grass Valley.

Year End Tax and Investment Planning Can Help You Avoid Tax Surprises and Save You Money

By Frederick “Rick” A. Fisher, MS, CFP®

This article was originally published in The Union on November 19, 2017. Click to view the PDF.

As the holiday season approaches, many of us are planning for all the events that the season brings. This is always a very busy for all of us. In the midst of it all we often do not set aside time for one of the most important tasks of the year. One that if we made a higher priority, could potentially save us hundreds if not thousands of dollars each and every year. What I am referring to is year end tax and investment planning! Now is the time we should be taking a look at where we are year to date in our investment and tax goals.  

The items we need to check on are many, but I will focus on three: Retirement Plan Contributions, Charitable Deductions and Payroll Withholding Options. 

To illustrate, we will take the hypothetical case of the Smiths. Greg is a self-employed consultant, and his wife Jan is a nurse at the local hospital. Greg and Jan each make around $80k per year. They are both 52 years old, want to minimize their tax liability and maximize their retirement funding. 

Greg currently has as SEP IRA that he has funded for many years. However, some years he has not had the cash necessary to fully fund his SEP. Since the limits to fund the SEP are based on his self-employed income, which fluctuates year to year, the amount changes year to year. This year, he decided to track his income each month and then save 20% of that number, put it in savings so he would have enough to fully fund this year and subsequent years till retirement. 

In order to prepare for their year-end tax planning meeting with their CPA, they gathered information on year to date retirement plan funding and reviewed what they had given so far to charity. Greg had invested $15k in his SEP so far, and has another $5k in savings that is earmarked for additional investment if possible. Jan has been deferring 5% of her income into the hospital’s 401k in order to receive the full match of 5%. They have a goal of contributing 5-10% of their take home to a list of local charities. Upon review, they had to date donated $3k in cash and approximately $1k in furniture, clothing and books to a local Thrift Store. That calculates to 4%, so they made a list of donations they planned to make before the year end. Finally, Jan reviewed her latest pay stub, to see if her YTD withholding was just right per income projection. Their goal was to have the withholding cover her income, and to avoid having the government holding her money for the year. They reviewed these items with their tax professional and left the meeting confident that they were on track for the year and that they would not have any tax surprises come April. If you are not certain of where you stand regarding your financial and tax goals, contact your financial professionals for a year end planning review.

Frederick Fisher is a Certified Financial Planning Practitioner, and Insurance Agent with Ostrofe Financial Consultants, Inc. managing over $208 million in assets, with clients in 29 states.  Advisory services provided by Ostrofe Financial Consultants, Inc., a registered investment advisor.  Separate advisory and securities services may be provided by National Planning Corporation (NPC), Member FINRA/SIPC, and a S.E.C registered investment advisor.  Ostrofe Financial Consultants, Inc. and NPC are independent and unrelated companies.  Please consult with your representative to confirm on which company’s behalf services are being provided.  For questions or suggestions, contact Rick Fisher at (530) 273-4425, or rick.fisher@natplan.com, or visit ostrofefinancial.com.  Branch address: 565 Brunswick Road, Ste. 15, Grass Valley.

This item is historical and based on information that was current at the time of initial print.  It contains information that has changed.  Staff and business names may have changed.

Five Key Decisions When Putting Together Your Estate Plan

By Frederick "Rick" Fisher
Originally published in The Union on April 24, 2016. Download the PDF.

Over the last 26 years, I have settled three estates — and in my 18 years of financial planning, I have seen the effects of good planning and of poor planning. 

Having an effective estate plan is crucial, however having a poorly thought out plan can be as harmful as having no plan at all. 

Our firm routinely advises our clients who have yet to address their estate planning to do so. We provide referrals to competent estate planning attorneys. However, having a good estate planning attorney who will guide you through the process and prepare the appropriate documents, is not necessarily going to give you a proper estate plan. A crucial ingredient to the process has little to do with the attorney or the documents. It has to do with the choices the trustors make regarding who will administer the estate upon the death of the trustors, and how the estate will be distributed. 

To illustrate we will take the case of the fictitious couple Richard and Monica Jones. 

Richard and Monica are in their early 40s with three children under 18, with the youngest being 8. Richard is a banker and Monica is a part-time teacher. 

A few years ago, Richard’s parents asked him if he would be the successor trustee for their trust. They chose him because he was a banker and understood financial concepts. They also felt that he had the proper temperament to take on this huge responsibility. Richard could separate the financial aspect of an estate from the personal considerations of an estate. Richard had seen firsthand in his role as banker, how having a person who struggles with the emotional part of administering an estate can create problems. 

He remembered how a successor trustee refused to sell assets in order to pay estate bills and taxes, because they could not detach the deceased from the business part of estate administration. This led to fines, additional costs and fire sales that ultimately led to angry beneficiaries and lawsuits. Having successor trustees that can handle the job, from a business and emotional standpoint is crucial. Having accepted the role as successor trustee, I reminded Richard that he and Monica, had yet to complete their financial plan. 

They had started, but got stuck on who would be the custodian for their three children; a key decision when creating an estate plan. Another concern for the Jones’ was how to fairly divide their property to their kids. Deciding to split the financial assets three ways was the easy part. The hard part was how to divide the personal items, the artwork, the collectibles, and the family photos. 

This was going to take time and more discussion. To complicate matters, the Jones are wealthy and they want to make sure that their children don’t receive a financial windfall till they are ready. So, the decision is who will monitor the investments, and when should the children have access to the money. Fortunately, once the decisions are made, they are not set in stone. Estate plans can be amended as needed. Once the kids are grown, there is no need for guardians. In addition, they may be able to help trustors fairly divide up those personal items that are hard to assign. 

In the end, Richard and Monica sat down and made the decisions necessary to get the plan in place, and took our advice to review every five years and make changes as needed. 

If you have been putting off estate planning due to these issues, now is the time to set up a partnership with an Estate Planning Attorney and a Certified Financial Planner. 

Frederick Fisher is a Certified Financial Planning Practitioner, and Insurance Agent. Securities and Advisory Services offered through National Planning Corporation (NPC), member FINRA/SIPC, a Registered Investment Advisor. Ostrofe Financial and NPC are separate and unrelated companies. For questions or suggestions, contact Rick Fisher at (530) 273- 4425, or Frederick.fisher@natplan.com, or visit ostrofefinancial.com. Branch address: 565 Brunswick Road, Ste. 15, Grass Valley

Long-Term Care Insurance: Don't Grow Old Without It

By Frederick "Rick" A. Fisher
This article first appeared in The Union on Feb 21, 2016. Click to view as PDF.

“Medicare And You 2015” reported that 70 percent of Americans 65 or older will need long-term care in their lifetime. With the average cost of a private room at a nursing home at $240 per day, and the average stay for non-Alzheimer’s patients at just over two years, many of us will have to come up with over $200K for care. For patients with Alzheimer’s, that cost could easily double.

Unlike auto and home insurance which are pretty much mandatory, LTCi is still optional. However, if you look at it from a risk-reward standpoint, it should be the most desired insurance for Americans 50 to 70 years old.

In the 20-plus years that we have been offering LTCi, the biggest hurdle to purchasing this valuable insurance is the cost. Fortunately, in the last few years, the numbers of options to purchasing long-term care has increased. There are now products to fit almost any budget — to at least cover part of the risk.

Let’s consider the situation for two fictional couples.

The Thomases and Smiths are both in their mid-50s and in good health. The Thomases have a substantial net worth and a large number of liquid investments. Their parents both lived long, healthy lives without needing any long-term care. Their biggest concern is to pass on assets to their heirs.

A universal life insurance policy with a long-term care rider provided the Thomases with protection against an early death and a long-term care financial burden. By using a portion of their liquid investments, the Thomases converted $100,000 into $250,000 of death benefit and $400,000 of long-term care benefit.

The Smiths’ perspective regarding long-term care is different than the Thomases. Mrs. Smith’s father needed skilled nursing care in a long-term facility. With no insurance in place, the financial burden became overwhelming.

The Smiths could not plan to rely on their savings to cover any potential long-term care costs, so we focused on finding the right insurance product to fit their budget — and reduce their risk as much as possible.

By utilizing a traditional term LTCi policy with a reasonable annual premium, the Smiths successfully protected nearly all of the $240 average daily cost.

The moral of the story — get current information on the pros and cons of Long Term Care insurance relative to your specific circumstances. Research all the new options available. Long-Term Care insurance might be expensive. Being without long-term care can be devastating.

Call us for a consultation and let’s check your needs before it is too late!

Frederick Fisher is a Certified Financial Planning Practitioner and Insurance Agent. Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered through Ostrofe Financial Consultants, a Registered Investment Adviser. Ostrofe Financial and NPC are separate and unrelated companies. For questions or suggestions, contact Rick Fisher at (530) 273-4425, or rick.fisher@natplan.com; branch address: 565 Brunswick Road, Ste. 15, Grass Valley, CA 95945.