NEWS
a life well planned is a life well lived
The Captain’s Log Spring 2018
By the time this newsletter hits your mailbox, the stock market will be in some stages of a volatile start to the year. The volatility that was missing from 2017 came forcefully back into the equity markets during the early stages of 2018 and delivered an immediate splash of cold water to the face to all investors who had become just a little too comfortable with the one-sided trading and easy sledding of the previous 15 months. Market turbulence can be unsettling, but we never want market shakeups to deter or distract us from our long-range investment goals, practices, and discipline. On the contrary, we want to use the new market
conditions and challenges as an opportunity to show our resilience and to hone our ability to exhibit productive investor behavior. Unfortunately, in our industry we are surrounded by investors who are tepid in their convictions and believe success can be reached by practicing market timing behavior. This most recent round of market jolts has once again proven market timing trades will most likely be an ill-fated and ill-conceived strategy. The equity market has a way of punishing those who try to rig or time their trades and ultimately the “weak longs� need to be shaken out of the system. (continued inside)
JAMESTOWNE INVESTMENTS NEWS What’s Inside: The Captain’s Log Why You Should Stay Invested Through Tense Times Your 2018 Financial To-Do List Tax Deductions Gone in 2018 529 Plans - New Options Beyond College Savings In the Community Updates and Reminders Recipe Corner - From Our Family to Yours
Ensure your financial plan addresses all of your life’s events. A life well planned is a life well lived.
A MESSAGE FROM CLAYTON Your Trusted Advisor
The Captain’s Log continued from cover
As a part of my quarterly business activities, I teach investor training courses at The College of William & Mary, Rappahannock Community College, and The University of Richmond. During my time with the always attentive students, I reiterate over-and-over again that success with your investments will ultimately derive more on your individual investor behavior than it will from your individual investment decisions. Your investment decisions are mechanical, measurable, and can be calculated to within a fraction of a percentage point. On the other hand, investor behavior is mental and emotional and much more difficult to manage. How do we measure, manage, and most importantly remove emotion from our investment lives and prevent the fear of loss from derailing our long-range life goals? Emotions have proven to be the enemy of all investments and it is paramount and critical to keep emotions in-check during these periods of excessive market volatility.
CLAYTON JAMES FINANCIAL ADVISOR
Let’s work together this year to understand, measure, and communicate clearly what your risk tolerances are and to ensure your investment allocations closely match your individual and appropriate investor profile. Regardless of market volatility, let’s make 2018 a great year!
“Successful investing is simply an exercise in deferred gratification; however, sometimes you will suffer great pain while you are waiting for your gratification” ~ Warren Buffett
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Why You Should Stay Invested Through Tense Times
Uneasiness impacts the financial markets. When it does, we all need to keep some long-term perspective in mind. Those who race to the sidelines and exit equities may regret the choice when crises pass. Wall Street loves calm. Traders literally want “business as usual,” every day. If breaking news disrupts that calm, it can rattle the market – but every investor must realize that these disruptive events are exceptions to the norm. (If the major Wall Street indices rollercoastered dramatically every day, who would invest in stocks to begin with?) History shows how the market has bounced back in the past. You probably know the old financial industry saying: past performance is no guarantee of future results. That is certainly true, but it is also true that the major indices have staged some impressive recoveries when confronted with turbulence. We do not need to look back very far to see some of this resilience. In May, the S&P 500 posted a single-day loss of 1.8%. Just three market days later, 85% of that loss had been recovered. Remember the stunning Brexit vote in the United Kingdom? The S&P fell 5.3% in the two trading days after that news broke. It took about a week to gain all of that back. When China startlingly devalued the yuan in August 2015, there was a true correction in the
S&P; it lost 11%. In roughly two months, it was back at its former level. Looking back further, we can be encouraged by how stocks rebounded after the unthinkable shock of 9/11. Wall Street was closed for five calendar days after the attack; on September 17, 2001, the Dow slid 7.1% (684 points). It would eventually drop more than 14%. The S&P 500 retreated 11.6% during the week when the market reopened. Even so, one month later, the three major U.S. equity benchmarks had recouped their losses. Stock market corrections happen regularly. In fact, this current period is one of the calmest on record. As the summer of 2017 wraps up, the S&P 500 has gone more than a year without a 5% dip. The last stretch this long without a 5% pullback was in 1995, and this has happened only six times since 1950. Back on May 17, the Dow slipped 373 points. Yet with the index comfortably above 20,000, that single trading session saw only a 1.8% retreat. A 1,000-point, single-day fall for the Dow 30 is now a possibility. If the Dow drops 1,000 points in a day for the first time, investors will be shocked – but they should remember that the Dow also rises.
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Tax Deductions Gone in 2018 What standbys did tax reforms eliminate?
Are the days of itemizing over? Not quite, but now that H.R. 1 (popularly called the Tax Cuts & Jobs Act) is the law, all kinds of itemized federal tax deductions have vanished. Early drafts of H.R. 1 left only two itemized deductions in the Internal Revenue Code – one for home loan interest, the other for charitable donations. The final bill left many more standing, but plenty of others fell. Here is a partial list of the itemized deductions unavailable this year.
Moving expenses. Last year, you could deduct such costs if you made a job-related move that had you resettling at least 50 miles away from your previous address. You could even take this deduction without itemizing. Now, only military service members can take this deduction.
Casualty, disaster, and theft losses. This deduction is not totally gone. If you incur such losses during 2018-25 due to a federally declared disaster (that is, the President declares your area a disaster area), you are still eligible to take a federal tax deduction for these personal losses.
Home office use. Employee business expense deductions (such as this one) are now gone from the Internal Revenue Code, which is unfortunate for people who work remotely.
Unreimbursed travel and mileage. Previously, unreimbursed travel expenses related to work started becoming deductible for a taxpayer once his or her total miscellaneous
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deductions surpassed 2% of adjusted gross income. No more. Miscellaneous unreimbursed job expenses. Continuing education costs, union dues, medical tests required by an employer, regulatory and license fees for which an employee was not compensated, out-of-pocket expenses paid by workers for tools, supplies, and uniforms – these were all expenses that were deductible once a taxpayer’s total miscellaneous deductions exceeded 2% of his or her AGI. That does not apply now.
Job search expenses. Unreimbursed expenses related to a job hunt are no longer deductible. That includes payments for classes and courses taken to improve career or professional knowledge or skills as well as and job search services (such as the premium service offered by LinkedIn). Subsidized employee parking and transit passes. Last year, there was a corporate deduction for this; a worker could receive as much as $255 monthly from an employer to help pay for bus or rail passes or parking fees linked to a commute. The subsidy did not count as employee income. The absence of the
employer deduction could mean such subsidies will be much harder to come by for workers this year. Home equity loan interest. While the ceiling on the home mortgage interest deduction fell to $750,000 for mortgages taken out starting December 15, 2017, the deduction for home equity loan interest disappears entirely this year with no such grandfathering. Investment fees and expenses. This deduction has been repealed, and it should also be noted that the cost of investment newsletters and safe deposit boxes fees are no longer deductible. In some situations, investors may want to deduct these fees from their account
balances (i.e., pre-tax savings) rather than pay them by check (after-tax dollars). Legal fees. This is something of a gray area: while it appears hourly legal fees and contingent, attorney fees may no longer be deductible this year, other legal expenses may be deductible. Convenience fees for debit and credit card use for federal tax payments. Have you ever paid your federal taxes this way? If you do this in 2018, such fees cannot be deducted. Tax preparation fees. Individual taxpayers are now unable to deduct payments to CPAs, tax prep firms, and tax software companies
An important note for teachers and business owners An important note for teachers. One miscellaneous unreimbursed job expense deduction was retained amid the wave of reforms: classroom teachers who pay for school supplies out-of-pocket can still claim a deduction of up to $250 for such costs. An important note for business owners. All the vanished deductions for unreimbursed employee expenses noted above pertain to Schedule A. If you are a sole proprietor and routinely file a Schedule C with your 1040 form, your business-linked deductions are unaltered by the new tax reforms. The tax reforms aimed to simplify the federal tax code, among other objectives. In addition to eliminating many itemized deductions, the personal exemption is gone. The individual standard deduction, though, has climbed to $12,000. (It is $18,000 for heads of household and $24,000 for married couples filing jointly.) For some taxpayers used to filling out Schedule A, the larger standard deduction may make up for the absence of most itemized deductions.1
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Your 2018 Financial To-Do List Let’s get started today working towards maximizing your tomorrow. What financial, business, and life priorities do we need to address during 2018? Now, early into 2018, is the time to begin arranging your priorities and working towards accomplishing your annual financial goals. Rolling over the old 401K, 403B, TSP Some investors have unrolled and ignored business sponsored retirement accounts needing and deserving special attention. Frequently these accounts are failing to generate their maximum investor benefit because the money is not being actively managed and monitored. Should you roll the money into an Individual Retirement Account (IRA) or what other options might you have? What investment choices do you have inside the current account and could this money benefit from being rolled into an IRA account? Make a Charitable Donation Most investors are going to participate in some sort of philanthropic activity this year. What is your charitable donation strategy and how are you going to manage making these donations? Is there benefit in establishing a private family foundation account to expedite your giving and to efficiently track your yearly philanthropic activity. I have a business relationship with The American Endowment Association. If philanthropic activity is high on your list, let’s have a conversation about setting up and funding a personal endowment account to consolidate your charitable giving activities. 'Tis the Ides of March – To Roth or Not to Roth Should this be the year to set up and fund a new Roth IRA account? Should you consider converting some of your traditional IRA assets into a new Roth IRA. There are a lot of benefits to a Roth account, but there are some hurdles and restrictions on these accounts as well. Tax Loss Harvesting By selling the underperforming assets in your accounts you can capture and use up to $3,000 each year in capital losses. Losses that exceed the $3,000 yearly limit may be rolled to subsequent tax years to offset future ordinary income and capital gains. Do we need to aggressively capture tax loss opportunities this year? 529 Accounts Trust me; as a father who is sending one child to The University of Alabama and has another child soon to graduate from High School, this issue is near and dear to my heart. Do you have children, grandchildren, or nieces & nephews who one day will be attending a qualified post-secondary educational institution? Take some action today to help tame the Tuition Monster. 529 accounts are great vehicles to help families save for and fund educations in a tax-free manner.
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In the Community Jamestowne Investments Educational Series Money Management Basics and Confidence Building for Women Clayton will continue teaching the Lifelong Learning educational series this semester at the following institutions: • The College of William & Mary- Christopher Wren Society • Rappahannock Community College- Institute of Lifelong Learning • University of Richmond- Osher Institute Course description: Women are rapidly becoming more interested and engaged in the decisionmaking and management details of their finances, wealth management, and investments. This course is designed specifically for women (and if they choose, their “significant others”) to learn the basics of finances, wealth management, asset allocation, and income generation. The three sessions will cover all of the entry-level information you need to feel confident and knowledgeable about the management of your finances.
For class schedule, please check the respective websites for additional information should you be interested.
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529 Plans New options beyond college savings Do you have a 529 college savings plan? Have you thought about opening a 529 plan account? If the answer to either question is “yes,” you should know about two major changes that broaden the possibilities for 529 plans. They may give your family some new options.
You may be able to pay K-12
tuition with 529 plan funds. The legislation popularly known as the Tax Cuts & Jobs Act authorized this change: under federal law, up to $10,000 of 529 plan assets can be withdrawn for this purpose annually, for each of the named beneficiaries of a 529 plan account. The funds may be used for tuition at both secular and religious schools. (While 529 plan assets can pay for a variety of “qualified” higher education expenses, tuition is considered the only “qualified” expense at the K-12 level.)1,2 Unfortunately, not all states are on board with this change yet. 529 plans are administered at the state level, and at present, less than half the 50 states (and the District of Columbia) treat 529 plan assets in a way that conforms to federal tax law.1
Some states – such as Utah – have 529 plans ready for K-12 withdrawals. In other states, such as Alabama, laws are on the books specifically barring 529 plan money from being spent on elementary education expenses. Amendments to these types of laws may be years away. Iowa, Maine, and Nebraska have issued notices telling 529 plan participants to refrain from using their accounts for K-12 expenses – for now.1,2 Then there is the matter of state tax revenue. More than 30 states and the District of Columbia offer tax credits or deductions for 529 plan contributions, but those tax breaks are linked to the withdrawals being used for higher education. Offering those perks to additional taxpayers will reduce the money flowing into state coffers.2 Another issue is the treatment of investment gains in 529 plans. If state law does not sync
529 Plans offer: •• POTENTIAL TAX ADVANTAGES •• YOUR OWN STATE MAY OFFER TAX BREAKS AS WELL •• OPPORTUNITIES FOR WEALTH TRANSFER •• LOW MAINTENANCE & FLEXIBILITY
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with federal law, do those gains become taxable at the state level? States need to address this.2 Keep in mind that you can save and invest in another state’s 529 plan. If you live in a state where the rules for the 529 plan are inconsistent with the new federal law, you have 49 other possibilities (50 counting the District of Columbia). You might federal law, do those gains become taxable at the state level? States need to address this.2 Keep in mind that you can save and invest in another state’s 529 plan. If you live in a state where the rules for the 529 plan are inconsistent with the new federal law, you have 49 other possibilities (50 counting the District of Columbia). You might lose out on your home state’s tax deduction for college saving, but you may gain the freedom to withdraw funds for K-12 tuition.3
Additionally, 529 plan assets may now be transferred to 529 ABLE accounts. If you have a child with special needs, you will be delighted to know that federal tax law now allows you to direct up to $10,000 a year from a standard 529 plan to an ABLE account. The transferred amount counts toward the annual ABLE account contribution.1 Families have been hoping for this development since the Achieving a Better Life Experience Act was passed in 2014. This option is scheduled to expire after 2025, but Congress may extend it or make it permanent before the expiration.1
You can also open multiple 529 plan accounts in multiple states. Plans in other states may offer different investment choices and allow higher account balances.3
Explore these possibilities today. Contact our office to see how you could potentially use 529 plan funds to pay for K-12 tuition or save for a child with special needs. 1 - forbes.com/sites/brianboswell/2018/01/22/your-529-plan-may-not-follow-new-tax-law/ [1/22/18] 2 - time.com/money/5093099/529-plans-k12-expenses-tax-bill/ [1/9/18] 3 - cnbc.com/2017/05/04/10-hidden-benefits-of-529-plans.html [5/4/17]
Newsletter Disclosures Securities and advisory services offered through Prospera Financial Services, Inc. Member FINRA/SIPC. The below material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Why ou Should Stay Invested Through Tense Times Tax Deductions Gone in 2018 Your 2018 Financial To-Do-List 529 Plans
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Updates & Reminders Jamestowne Investments/Prospera Cutoff Times Check requests
ACH requests
Wire transfers
1:30 p.m. E.T.
3:30 p.m. E.T.
3:30 p.m. E.T.
DTC/DRS transfers
Trades/Mutual funds
Journals to other accounts
1:30 p.m. E.T.
4:00 p.m. E.T.
4:00 p.m. E.T.
Moving Funds into Jamestowne Accounts When moving funds into investment accounts, there are three ways you can make deposits into your Jamestowne accounts: • Wire • Check • ACH For any questions about these options, please feel free to contact us.
Checks Payable Reminder If you are making a check our for your Jamestowne Investments account, please note that we are only able to accept checks made payable to you (the client) or First Clearing, LLC. You may send them to our mailing address unless otherwise instructed. Ex: John and Jane Doe Account # 1234-3456 -OREx: First Clearing, LLC. c/o Prospera Financial Services, Inc. FBO John and Jane Doe Account # 1234-3456
Contact Records Help us keep our records up-to-date by sending your name, phone, address and email info to gjames@jamestowneinvestments.com. As always, we will not distribute your contact information to anyone.
Your referral is the highest compliment we can receive. 263 McLaws Circle, Suite 101 | Williamsburg, VA 23185 | 757.941.5150 jamestowneinvestments.com 12 /
Recipe corner From our family to yours
Clam Spaghetti Recipe by Ginger James Ingredients
2 cans minced clams w/juice 1 onion, chopped 2 cloves or 2 tsp of garlic, chopped Butter to sauté onions and garlic- I use ½ stick White wine- of course. I use a lot. Liquid smoke- a few drops (like 5) Cream or half & half, probably 1c -1 1/2c 1 cup of grated fresh Italian cheese (I usually use a three-cheese blend of Parmesan, Romano and Asiago) Italian spices (oregano, basil, salt and red pepper) to taste
Preparation
Saute onions and garlic until translucent Pour in clams and liquor from the clams and simmer a few minutes Add wine and simmer more Add cream, cheese and liquid smoke and simmer Add the spices Simmer until desired thickness Serve with thin spaghetti or angel hair pasta
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Securities and advisory services offered through Prospera Financial Services, Inc. Member FINRA/SIPC.