Wednesday, April 19, 2017

Paying Zero Federal Income Taxes in Retirement

"People would rather stick a pin in their eye than think about taxes after April 15th."  ~ me

My goal over the next few years is to pay as zero federal income tax.   And it will be 100% legal.

How am I doing it?

Income Source
First, since we are retired, we can manage where income is derived and choose a source that is most tax efficient, dividends and long term capital gains, which has a special federal tax rate of 0% for taxpayers in the 15% tax bracket.

Itemized Deductions
Second, we have itemized deductions that can reduce ordinary income (wages, rents, IRA distributions) by 1/2. I am still not old enough to collect Social Security, but deductions can also reduce the amount included in adjusted gross income (AGI).

Tax Credits
Third, we have two children that each qualify for a $1000 child tax credit.  This enables us to eliminate any remaining income tax after itemized deductions.

These are legitimate strategies for reducing one's taxes.  I also know that tax laws may change and eliminate any or all of the three strategies that we plan to use.

For more on The Practice of Personal Finance, check back every Sunday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Saturday, April 08, 2017

A Hard to Make Money Stock Market

This is a frustrating stock market.   The market is pricing in high expectations for Trump's administration and the Republican congress, despite no concrete results being delivered.  The advancing stocks are narrow.  Investors do not seem to have any conviction.

As a result, the market indices are trading sideways in a narrow band.   It's kind of like watching paint dry.  Not very exciting.

In addition, only a few stocks (e.g. Amazon, Facebook, and Apple) are are making significant advances.  The rest are flat or even falling.

The good news is that most of our accounts are near their highs.   The bad news is that these accounts are not achieving new highs.   So our accounts are not growing.

For now, I have no confidence in the market direction, nor any confidence that Trump and congress will meet expectations.   I will wait for a more clear market direction before putting any significant amount of funds back into stocks.

For more on  Reflections and Musings, check back every Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Saturday, March 18, 2017

Career Path and Expectations Explained in a Graph

I found this on the Internet under Life Explained in Graphs:



This one gave me a good chuckle.

For more on Reflections and Musings, check back  Saturdays for a new segment.

This is not financial or career advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Thursday, March 09, 2017

Happy 8th Anniversary

Today marks the eighth anniversary of the bull market that started on March 9, 2009.

It wouldn't surprise me to see the bull market end in the next year, but then again, I've been expecting a an ending to occur since 2011.  I haven't been right yet, which isn't a bad thing.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Wednesday, March 08, 2017

Waiting for Extreme Carnage Before Buying

"To the pain..." ~ Westley from The Princess Bride

I'm itching to buy, but I'm going to wait.

In 2013 (the tape tantrum) and 2016 (worst start to S&P in history), I started buying right away and endured a month of further decline.  Then for Brexit and the Trump election, I waited and missed the immediate rebound of 2 days and 6 hours.

I expect this time the decline will be longer and more drawn out for the following reasons:

  • The Fed is raising interest rates.   
  • Trump's honeymoon fading fast.  And Trump is running out of items that can be dealt with by executive order.
  • Too many stocks are near 52 week lows despite the indices being near all time highs.
  • The low bar of expectations for Trump is rising.
  • Obamacare repeal and replace proposal disappointingly is really Obamacare tweak and refine.  
  • And the Fed is raising interest rates.
So I will wait for the market to become painful before buying.  Currently, I'm thinking of a 20% decline before doing most of my buying.  However, if a reversal occurs before 20% is reached, I may start buying.

Hopefully, I will be able to buy low.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Monday, March 06, 2017

Preparing for a Really Ugly Market Downturn

While I don't know when the markets will turn down significantly, I want to be prepared for the inevitable.   Here are my two ugly market scenarios:

The first scenario, which some may expect, is the market will fall quickly, 10, 20, or maybe 30+% , over a couple months and then recover.  This scenario is usually painful, but short lived.

The second scenario, which others may expect,  is the market falls slowly over 6 months to two years. This scenario is usually painful for those expecting the first scenario and stay in the market or put more fund in while waiting for the rebound. Since this scenario extends the pain for a longer period, this scenario is particularly ugly.

Over the past few years, we've reduced our equity exposure from about 50% to about 25%.  This has been done primarily by reducing our exposure to my company stock by 66%.   So this has reduced our risk in two ways.

So if the stock market falls significantly, our downside will be about 25% of the market indices, which gives me comfort.   Of course, if the market rises significantly, we will only experience 25% of the gain in market indices.  However, given the current uncertainty of the markets, it is a trade off that I am happy to make, so that I can sleep better at night.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Wednesday, March 01, 2017

Time for Investing Discipline

Despite numerous predictions of a market rout if Donald Trump was elected, the market has done exactly the opposite, rally about 15% since the election.    This totally unexpected market rally is giving me the opportunity to do some portfolio adjustments.  

Dispense with Losers.
First, I'm am selling some of the investments that have gone down or stayed flat.    If they aren't rising in this market, these stocks are probably dead money.  I sold most of our retail stocks.   I've sold some oil stocks.   However, I'm still keeping many of my energy stocks despite their stalled recovery.  

Trim the Winners.
I am taking profits in some of our winning stocks.  For most, I am selling a partial position, for a few, I am selling the total position.   Mostly, I have been selling off part of some of my biotech positions.  In addition, I am also taking profits by trimming our managed accounts to the minimum investment amount.

Identify Trading Opportunities.
There appear to be certain sectors and stocks which are taking off in short bursts.  I will experiment with buying small positions in these advancing stocks and then selling them after 10-50% gains.   This is purely a technical trading approach.  

Increase Cash for Future Buying Opportunities.
Some time in the future, the market will correct.   I will be ready to make some additional purchases in our core position, or adding more dividend paying stocks.

I don't sense a correction yet since there is little exuberance.  At the same time, I don't see a lot of conviction for this rally.     So we will continue to keep a base amount invested to participate in the rally, while waiting for correction to occur.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Sunday, February 19, 2017

Changing My Retirement Sleeping Schedule

"Early to bed and early to rise." ~ Benjamin Franklin

When I was working, I would go to bed at midnight and get up at 5AM.   After retiring, I slowly evolved to going to sleep at midnight and getting up at 8PM.   I'm consciously thinking about gettng up earlier (about 5-6AM) and going to bed earlier (9-10 PM).    Even on weekends and holidays.

This may be challenging since I am more of a night person.  However, getting up early may allow me quiet time to put significant effort against some projects, before the family is awake.  Also, I've learned that even though I'm retired, there are still some things I need to do only during normal business hours.

So tonight, I'll be to bed by 10PM.  Tomorrow, I'll be up by 6AM.

For more on  New Beginnings, check back Sundays for a new segment.

This is not financial or sleeping advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Returning to Periodic Posting

With this post,  the number of 2017 posts (77) is equal to all the posts from 2014 through 2016.  I guess I had a lot of pent up posts ready to go.  It's been fun.  However, I think I used up all my material ready to post in the near term.

So I am moving back to periodic posting of at least once a month, which is what I did for most of  2015 and 2016, after taking a sabbatical in 2014 .  

For more on New Beginnings, check back Sundays for a new segment.

This is not financial or blogging advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Saturday, February 18, 2017

Places I Like to Shop

First, I admit I am an technology Neanderthal.  I don't have a cell phone, I don't have a Facebook account, and I don't shop online.

I still prefer to shop at brick and mortar stores, where I can still touch and feel the item(s) I am buying.   Still I have a preference of stores where I make purchases.  Here is my top stores list:

  • Costco -  First, I know Costco is charging a minimum markup price.  So I know I am getting a good deal.  Second, I like the items the Costco buyers choose.  There selection is not wide, but it is good.   Third, Costco has a lifetime satisfaction and return policy, except for computers, cameras, and TVs.  So I can try something out for a while and decide.   The downside is the emphasis on bulk purchases, leading me to buy a several months worth of some items.

    I like buying specialty clothing, seasonal gear, and staples (like batteries) at Costco.   Occasionally, I find something that I really wasn't considering, but thought it would be fun to try (e.g. a gazebo kit, which took me a couple weeks to assemble).

  • Lowe's -  This is my go to store for household maintenance items.  I can usually find what I need or they will direct me to a place that my carry the item.  Also, several of the associates are long time employees and are very knowledgeable.  The prices are also very good.  I applied for the Lowe's credit card, since it gives an automatic 5% discount.  Lately, Lowe's has been giving out an 11% coupon randomly when I make a purchase.

    We purchased our last two kitchen appliances there.  We found new handles to upgrade our cabinet look.   We just purchased electrical plate covers to replace the brass ones.  Our next purchase will be to replace the faucets and sinks as needed.

  • Whole Foods - Yeah, they're expensive.  However, often they are the only grocery store that carry some of the prepared vegan, no oil added foods that are part of my diet.  Fortunately, these products go on sales sometimes and I stock up.

  • Trader Joe's -  Good healthy food and great prices.  An excellent opportunity to try new foods.   Also, it has a great selection of staples that help me maintain my vegan, no added oil diet.

  • Kroger's -  This is our local grocery store.  They have been expanding into the organic foods market with their own private label brand, which is very cost competitive.  Also, we buy a lot of our produce here.
These stores are where I probably spend 80% of my funds.   So I really don't need the online purchasing capability.

Disclosure:  We own Kroger in our personal accounts.  One of our managed accounts owns Costco.  Also, I received no compensation for writing this post.

For more on Reflections and Musings, check back Saturdays for a new segment.

This is not financial or shopping advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC