Webinar Transcript: "Last Minute 2024 Wealth Planning Ideas"

Jonathan Shenkman

November 26, 2024

Transcript: Last Minute 2024 Wealth Planning Ideas: Ensuring Your Clients Make the Right Moves Before Year End

Host: Jonathan I. Shenkman, President & Chief Investment Officer of ParkBridge Wealth Management (Contact: jonathan@parkbridgewealth.com)

Good morning and welcome to the Parkbridge Wealth Management fall Webinar Series. This program is entitled Last Minute 2024 Wealth Planning Ideas: Ensuring Your Clients Make the Right Moves Before Year End. My name is Jonathan Shenkman, and I'm the president and chief investment officer of Parkbridge Wealth Management. In that role I serve in a fiduciary capacity to help my clients achieve their financial objectives and my practice focuses on working with high net worth families, businesses and not-for-profits. I manage individual investment portfolios, trust accounts, corporate retirement plans, and endowments to help my clients achieve their financial goals.

In addition to the 20 or so events I run every year, I also do a fair amount of writing on the topics of investing and financial planning, and you can read my work in a variety of periodicals, including Barron's, Forbes, the Wall Street Journal and Trust and Estates Magazine to name just a few. You can see all my work on my website at parkbridgewealth.com/articles, or by following me on social media at Jonathan on Money. Additionally, you could check out my weekly podcast which is also called Jonathan on Money wherever you get your podcasts.

This is the 3rd year-end wealth planning webinar for me. I guess this has become somewhat of a tradition. For folks who have never attended my year-end webinars, I'll aim to offer a bunch of different planning ideas to help you and your clients before December 31st and beyond.

[Investment Do's and Don'ts]

I'll cover a whole host of timely topics from investing, estate planning, tax strategies and helpful context, so prepare to receive a fire hose of information and have a pen and paper ready.

First, let's start with some investment do's and don'ts:

Do Consider Rebalancing Your Portfolio

Many parts of the market went up in 2024. However, there may be individual investments within your portfolio that went down or didn't go up as much as other areas. This may include REITs, international stocks and investment grade bonds, all of which have underperformed the S&P 500. Given these market dynamics, many investors' portfolios are probably out of whack, and it may make sense to rebalance your portfolio to ensure allocation is brought back to the appropriate risk tolerance.

Don't Chase Past Performance

Today and every day is a good reminder to stay away from the current hot strategy du jour. Every year there's always some investment or portfolio manager that did phenomenally well. Unfortunately, it's impossible to know beforehand which manager, strategy or index that will be. This won't stop aggressive salesmen from capitalizing on recent success and encouraging investors to invest in yesterday's winners. As I always try to emphasize to my clients: The markets move in cycles. One year's winners are oftentimes losers in the following years. The key is to stick with a proper asset allocation and plain vanilla investments that will allow you to achieve your goals.

Consider Setting Up an Investment Policy Statement

One way to stick to a disciplined plan is developing an IPS to help define investors' goals, risk tolerance, and other considerations to ensure they are on track to achieve their objectives. Most importantly, it will help investors ignore the noise and slick salespeople trying to sell them something imprudent.

[Required Minimum Distributions (RMDs)]

Next idea is regarding Required Minimum Distributions or RMDs. RMDs apply to folks who are 73 or older. If you are subject to RMDs and you don't take them out before the end of the year, there will be a penalty. If you don't need your RMDs to pay your living expenses, explore other options like giving to charity.

A good planning tip is to utilize Qualified Charitable Distributions which allows you to give up to $105,000 from your IRA directly to charity without needing to pay tax on these monies, and they count towards your RMD.

[Charitable Giving Strategies]

When it comes to giving to charity, there are a myriad of creative options this year:

Cash Contributions

The deduction for cash contributions directly to charity increased from 50% of AGI to 60%, including for gifts to a donor advised fund. If this act sunsets, this limit will revert back to 50%. So donors should consider maximizing their cash gifts today.

Donating Appreciated Stocks

This is especially relevant in 2024 when stocks skyrocketed. It may also apply if you have a concentrated stock position with large unrealized capital gains. This may be through:

- Accumulating shares from working at a company for many years

- The appreciation over decades of a long-held position

- Investors having large gains in big tech stocks that keep rising and want to trim their position

For all these scenarios, they can consider donating these highly appreciated securities directly to charity, which helps avoid paying capital gains tax. It also allows you to minimize a large position which helps de-risk your portfolio.

[Donor Advised Funds]

A donor advised fund (DAF) is an account where you could deposit assets for donation to charity over time. The donor gets an immediate tax deduction when making a contribution to a DAF, and can still control how the funds are invested and distributed to charity. A DAF can be extremely useful if you hold:

- A security with no cost basis

- A highly appreciated stock

- A concentrated position

In all of these scenarios, the tax liability can be circumvented by moving that position to a DAF.

DAFs are also useful when bunching your charitable contributions, which involves donating several years worth of charitable contributions all at once. Charitable contributions are only tax deductible to those who itemize their deductions, and this year the standard deduction is:

- $14,600 for single filers and those married filing separately

- $29,200 for those married filing jointly

- $21,900 for heads of household

To help your itemized deductions exceed the standard deduction amount, one could bunch multiple years worth of charitable donations. This allows the donor to exceed the standard deduction and take the itemized deduction, yet still distribute the funds over the current and subsequent years.

[Roth IRA Conversions]

This is the process of transferring retirement funds from a traditional IRA, SEP-IRA, or 401(k) into a Roth account. Since traditional IRAs are tax-deferred while the Roth is tax-exempt, the deferred income tax will need to be paid on the converted funds at the time of the conversion, and there's no early withdrawal penalty.

The key is to evaluate your personal tax situation. This strategy may be beneficial if a saver believes that the postponed tax liability in the traditional account will be more onerous as retirement approaches. For example, if they think tax rates will go up if they move to a higher tax state, or if they will be earning a higher income in the future. This may also be an interesting opportunity for folks who are laid off this year and have a lower income than usual. Be mindful that if paying the tax bill now is too burdensome, then this may not be a good option for you.

Another planning tip is to sit down with your tax advisors to determine how much income can be realized within your current tax bracket before creeping into the next tax bracket to assess how much of your traditional retirement funds to convert to a Roth.

[Beneficiary Updates]

Retirement accounts and insurance policies have beneficiary designations that pass outside of one's will. Therefore, even if you did estate planning, it's important to review your various beneficiary designations to ensure that your money is passing according to your wishes.

Also be aware of and plan for changing family dynamics. Did a family member who is a beneficiary on your account pass away this year? Did you want to alter beneficiaries because your family dynamics have changed? Be sure to reach out to your advisor to update them on your situation and discuss best practices.

The example I always like to give is regarding an ex-spouse inheriting your assets, which is a devastating misstep and not unheard of.

Here's a timely planning tip that is tangentially related: In late 2019, Congress passed the SECURE Act which eliminates the stretch option on distributions from inherited retirement accounts. Under the new rules, most non-spouse beneficiaries are required to fully distribute inherited account balances by the end of the 10th year following the year the account owner dies. Conducting annual beneficiary reviews is a great way to identify clients whose estate plans have been impacted by this change, and it may prompt discussion with clients and their heirs on efficient wealth transfer strategies, for example, utilizing a charitable remainder trust to replicate the benefits of the now defunct stretched IRA.

[Estate Planning Considerations and Numbers]

Now let's briefly discuss some estate planning considerations and numbers. The Federal unified estate gift tax exemption for 2024 has been at an all-time high of $13.61 million or $27.22 million per married couple. And it's going to rise next year to $13.99 million/$27.98 million respectively. Additionally, the gift tax annual exclusion amount will increase from $18,000 per donee this year to $19,000 in 2025.

Regular gifting is a wonderful method of getting money out of your estate for estate tax purposes. My guess is that the Trump administration will eventually extend the tax benefits under the TCJA, but anything could happen in Washington.

Here's a planning tip: Make the most of these high exemption amounts today because no one knows what the future holds. At this point in time, these amounts are scheduled to be reduced at the end of 2025 to pre-2017 levels, which is about half of what they are today. Remember, the future is always uncertain, and you should plan accordingly.

[Planning Considerations for Married Couples]

Speaking of making the most of the exemption amount before the end of 2025, here are some planning considerations for married couples:

Split Gifts

Both spouses should consider making use of their exclusion amount before 2026 decrease. If neither spouse has used much or any of their exclusion amount, one spouse can make a gift of about $28 million. Then both spouses can make a split gift election that for Federal gift tax purposes would treat the gift as having been made equally by both spouses. Note though, that this approach does not work efficiently if one spouse has previously used much of their exclusion amount.

Consider Ownership Changes

If one spouse has a significantly larger percentage of assets than the other spouse, they may reallocate the assets so that each spouse can take advantage of the exclusion amount. Such changes could result in a significant shift of marital assets between spouses.

SLATs (Spousal Lifetime Access Trusts)

SLATs are irrevocable gifting trusts that move assets and future appreciation outside of one's taxable estate, but include a spouse as a beneficiary so that the grantor has indirect access to the funds if needed in the future. In order to have SLATs created by spouses for the benefit of each other recognized for gift tax purposes, it's often advised to create them at different times, even in different tax years. Therefore, to complete these prior to the sunset at the end of 2025, you will need to start before the end of 2024.

[Cash Management]

Next, and this is the question of the hour: where to keep your cash, as the yields drop well below the 5% that investors enjoyed throughout most of 2024. Let me run through a quick framework to help determine where to best allocate your cash.

First, what is the purpose of the cash? Maintaining a sufficient level of cash helps families pay their routine bills and provide a cushion in case of an emergency. This is typically 3 to 6 months worth of expense money. It's also important to have enough cash for any short-term large financial outlays. Anything more than that may be financially imprudent.

Let's discuss the fallacy of "risk in principal," and this phrase drives me absolutely crazy. Oftentimes friends will tell me that they like to keep their funds in cash equivalents so they don't risk losing principal. This shows a lack of understanding of risk and how it impacts our lives. Remember, money that's kept in cash for too long or short-term bonds will inevitably end up losing buying power in the future. While the dollar amount appears to slowly increase every year, it is not rising as quickly as inflation. Therefore, if you intend on saving money for your future, keeping it in cash or bonds which will underperform the rate of inflation will ensure that you can buy less goods and services with your dollars in the future.

[Investment Time Horizons]

Your time horizon ultimately should determine where to put your money. For example:

Cash Equivalents

Should typically only be used for an emergency fund of 3 to 6 months worth of expenses, or possibly a bit longer if you have a significant upcoming expense. Suitable cash investments for this bucket are money market funds, CDs, and perhaps T-bills, even as rates continue to drop. You don't want to risk short-term funds in other investments. The key is having liquidity when you need it.

Bonds

These typically offer lower returns than stocks but higher returns than cash equivalents over time. Bonds are useful in achieving intermediate goals since they help diversify a portfolio and reduce investment risk. If you have a goal that is less than 10 years down the road, bonds should be a component of your investment strategy.

Stocks

These are the ultimate investment for long-term portfolio growth. If you'd like your portfolio to grow over the long term and outpace inflation, stocks should be a significant portion of your holdings. Any investor with a 10-year or longer time horizon is doing themselves a major disservice if they don't own stocks.

Alternative Investments

Most people should avoid these. They are typically less liquid, far more expensive, tax inefficient, and usually don't achieve the returns they claim. They are also sold on hype and not merit. I'm sure this may be triggering to some people to hear, but it's the truth.

Here's a planning tip: Ask yourself, what are you looking to accomplish with your money? Your answer will determine when you need the money and lead you to the correct decision based on the framework I just laid out.

[Cash Management]

[Investment Time Horizons]

Your time horizon ultimately should determine where to put your money. For example:

Cash Equivalents

Bonds

Stocks

Alternative Investments

[Interest Rates and Estate Planning]

Interest rates are important for more than just lending and bond investments. There are several types of estate planning strategies that use numbers derived from the Federal funds rate and may be beneficial in this changing interest rate environment. One of these numbers is the Section 7520 rate. The 7520 rate is a factor used in making various calculations, such as remainder interest, charitable deductions and minimum thresholds for sophisticated estate planning strategies.

Here's a planning tip: Consider rolling Grantor Retained Annuity Trusts or GRATs which can be helpful in a changing interest rate environment and in choppy market conditions. A GRAT is a type of irrevocable trust that allows the grantor to transfer assets and receive annuity payments for a set period of time.

Rolling GRATs means setting up multiple GRATs that can help grantors navigate interest rate fluctuation with greater confidence. For example, given today's still relatively elevated interest rates, a single GRAT might struggle by not holding investments that outpace the 7520 rate. However, a series of short-term rolling GRATs, funded with marketable securities like stocks, is likely to thrive regardless of interest rate backdrop.

If the stocks in any one GRAT fail to outperform the applicable 7520 rate, that GRAT fails. In this situation, the donor simply just receives their stock back without penalty and without using much, if any, of their gift tax exclusion. If the stocks in a GRAT outperform the 7520 rate, the net proceeds flow to the donor's beneficiaries and effectively transfer wealth.

[529 Contributions]

Next is 529 contributions. A 529 is a tax-advantaged college savings account that may provide an opportunity for immediate tax savings if you live in one of the 30 states or more offering a full or partial deduction for your contribution to the home state 529 plan. Most states require you to invest in the in-state plan to receive the deduction for your contributions, though there are several states that are considered tax parity states, meaning you can use any state's 529 plan to receive the deduction.

One strategy to consider is super funding the 529 accounts if you're able to. Here, you can spread a tax-free gift to a 529 account over 5 years for gift tax purposes. So a married couple, not making any other gifts to the beneficiary during the 5-year period, can contribute up to $180,000 to a 529 plan for their child and with the election not run into a gift tax problem.

Now for a planning tip: 529 assets are not currently factored in as assets for the purpose of determining Federal financial aid under the FAFSA process if held by grandparents as opposed to parents where they are considered. This may be a wonderful way for grandparents to save for their grandkids' higher education without jeopardizing their ability to qualify for financial aid.

[Tax Loss Harvesting]

Next idea is tax loss harvesting, which is the process of selling securities at a loss to offset a capital gains tax liability before year end. When reviewing portfolios with your clients, advisors should determine if there are opportunities to strategically generate losses to offset other gains. For example, using a tax swap strategy for mutual fund holdings allows you to realize tax loss while retaining essentially equivalent market exposure. The key is that the funds are not substantially identical.

The way around that is by using different fund companies that track different indices and may have slightly different strategy, but that still have similar results. A common example which I mentioned in previous webinars is swapping out an S&P 500 fund at one company and buying a total US Market index fund at another company. One thing to be mindful of is minimizing short-term capital gains. This strategy may be used to limit the recognition of short-term capital gains, which are generally taxed at a higher Federal income tax rate than long-term capital gains rate.

Here's a planning tip: One creative approach to tax loss harvesting is to donate cash proceeds from the sale of stocks that had a loss. In this strategy, investors benefit from recognizing a loss by selling stock that went down in value. The loss can be used to offset any capital gains for the year, or it can be used to offset up to $3,000 of ordinary income. That is in addition to the charitable deduction you receive for your cash donation from the proceeds of the sale.

[Employer Retirement Plans]

Next idea is regarding employer retirement plans, and here are a few items to keep in mind:

Assess Contributions Made This Year

You should review how much money you contributed to your employer retirement plan this year. If you're financially able to, it's worthwhile to max out your 401(k) or 403(b) if you have not done so already in 2024. Those limits are $23,000 before any company match, or $30,500 if you're 50 or older.

Review 2025 Contribution Limits

Be mindful of next year's contribution limits. For 2025, the contribution limit increased to $23,500. Catch-up contributions will remain the same at $7,500 for those 50 to 60, and this is interesting: The IRS now permits an additional catch-up for employees ages 60 to 63 of $11,250, instead of just the $7,500. So don't forget to make the required tweaks within your plan to ensure you're making the maximum contribution for the coming year.

Roth vs Traditional Considerations

Next is the classic deliberation between a Roth and traditional. The rule of thumb is, if you think you may have a high income year, then a traditional IRA may make more sense. If you anticipate a low income year, then a Roth IRA may make sense. You can speak to your advisor about what makes the most sense for you.

Review Investment Lineup

Also review your investment lineup and portfolio. Determine with your advisor if it makes sense to make any changes. This is especially applicable if your firm switched 401(k) providers recently, if you rolled over an old 401(k) into your IRA, or if you're approaching retirement. In any of these scenarios, tweaking your investments may make sense.

Consolidation of Old Accounts

If you have old retirement accounts still held at previous employers, be sure to consolidate them into an IRA to keep your assets organized. It rarely makes sense to have old retirement accounts scattered at various institutions, especially old employers. If you need help consolidating old accounts, let me know if I could help.

Here's a planning tip for clients with 1099 income or who are self-employed: Consider setting up a solo 401(k). Even if an individual is maxing out their employee contribution through W-2 job, they could still make a profit-sharing contribution into their solo 401(k), deferring taxes on up to an additional $69,000 depending on their self-employed income. For people in a higher tax bracket, this strategy can allow them to defer more funds for retirement, reducing their taxable income and increase their nest egg.

[Health Savings Accounts (HSAs)]

Next, consider maxing out your Health Savings Account, or HSA, which allows you to save and pay for qualified medical expenses with tax-free dollars. In order to contribute to an HSA, you have to be enrolled in an HSA-eligible health plan. You can only contribute a certain amount to your HSA each year, but all contributions roll over from year to year.

In 2024 you can contribute up to:

- $4,150 for yourself

- $8,300 if you have family coverage

In 2025, you'll be able to contribute up to:

- $4,300 for yourself

- $8,550 if you have family coverage

At age 55, individuals can contribute an additional $1,000.

[Flexible Spending Accounts (FSAs)]

If your clients have an employer-sponsored benefit, they may have access to a Flexible Spending Account, or FSA. FSAs allow you to contribute pre-tax money up to a certain amount to an account that can be used to pay for eligible out-of-pocket health care expenses or eligible dependent care services such as childcare. However, FSA funds typically are "use it or lose it," meaning they generally can't roll the full amount into the next calendar year. To avoid losing any unspent funds, make sure to plan to use the money before December 31st.

[Budgeting and Expense Goals]

Now let's turn to budgeting expense goals for the upcoming year. It's always essential for investors to assess their expenses and plan ahead for the future.

Cash Flow Management for Retirees:

This is especially important since retirees must evaluate how much cash they will need in the future year to be able to live on and should work with their advisor to ensure they're able to meet their cash flow needs.

Mitigating Sequence of Returns Risk:

Retirees should target a higher cash cushion than what is typically recommended for non-retirees in order to sufficiently mitigate the risk of experiencing lower or negative returns early in retirement when withdrawals are made from an investment portfolio. The order or sequence of investment returns can significantly impact your portfolio's overall value, and consequently your ability to maintain your lifestyle later in retirement.

Here's a budgeting planning tip: Over the past few years, expenses have risen due to inflation for clients that are in the deaccumulation stage of retirement, planning and drawing down their portfolio. The amount of money they need may have increased. While many financial advisors use 4% as a safe amount of money investors can withdraw from their nest egg every year, it's worth reassessing these numbers every year based on personal circumstances, market performance and the economic environment, including inflation, to see if anything has changed.

[Business Owner Planning Strategies]

Now, a planning idea for business owners: It's worth discussing with business owner clients about how to transform net operating losses (NOLs) into tax-free income with a Roth IRA conversion. Business owners who will record a net operating loss this year may be able to use it to their advantage. Unlike net capital losses where taxpayers are limited to using $3,000 annually to offset ordinary income, taxpayers can generally apply NOLs against 80% of taxable income. Clients carrying forward large NOLs can use those losses to offset the additional income from a Roth IRA conversion.

The rules on calculating and utilizing NOLs are complicated, so it's critical to consult a tax professional. It's worth noting that more information on NOLs can be found within IRS publication 536.

[Qualified Business Income Deductions]

Here's a planning tip for business owners regarding qualified business income deductions. The Tax Cuts and Jobs Act created a new tax deduction for business owners known as the qualified business income or QBI deduction. It permits certain pass-through entities, like sole proprietors, partnership and S Corporation owners to deduct up to 20% of their business income, subject to certain income thresholds and other limits. This deduction is also slated to sunset at the end of 2025.

As a result, accelerating income to obtain the 20% deduction may provide a significant tax benefit for business owners who qualify for this exemption.

[Income Tax Planning]

Now let's discuss income tax planning. The first important item to consider is utilizing tax projections to help lower your tax bill in the future. This is something that your CPA can help you with. These projections show what your tax future might look like, based on a set of assumptions. They are most impactful for people who have control over the timing of their income like a business owner.

In general, year-end income tax planning often involves trying to accelerate deductions and defer income while being sure to take advantage of lower marginal tax rates and avoid income bunching in future years. A good starting point is using your income and deduction information from your last tax return and adjusting for anything you know about the current year, such as changes in income tax rates, potential deductions, and so on, then calculate what your taxes would be based on those conditions. The more you know about your current year's finances, the more accurate the projections will be. That's why it's important to wait until later in the year to run these projections.

[Planning Tips for Different Income Scenarios]

Here are some planning tips - a cheat sheet of opportunities to keep in mind:

Opportunities in a Higher Than Usual Income Year:

- Maximize contributions to tax-advantaged accounts

- Accelerate income tax deductions

- Tax loss harvesting

Opportunities in Lower Income Years:

- Converting pre-tax assets to Roth IRA

- Proactively taking distributions from your IRA account if you're of age

[Alternative Minimum Tax (AMT) Considerations]

Next idea is Alternative Minimum Tax or AMT considerations with incentive stock options. AMT is an alternate tax calculation that's computed by removing many of the typical income tax deductions. The Tax Cuts and Jobs Act significantly increased the AMT exemption amount, meaning it increased the threshold at which a taxpayer is subject to AMT. However, this exemption amount will return to pre-Tax Cuts and Jobs Act levels in the event of a sunset, so more taxpayers may be subject to the AMT.

A planning tip regarding the exercise of incentive stock options (ISOs): ISOs aren't considered to be income for regular tax purposes, but it is considered income for AMT purposes. This can result in AMT being due in the year of exercise. For people with ISOs that will be available to exercise pre-2026, it's advisable to take the potential changes of exemption into account when developing an exercise strategy.

[Trump's Tax Proposals]

Let's now shift to talk about Trump's tax proposals. This is just general knowledge that may be helpful in your discussions with clients.

Income Taxes:

Trump has expressed support for extending the income tax provisions on a short-term basis as Congress debates a larger tax reform package. That could mean Federal tax brackets would stay where they are today with a top marginal rate of 37%. The SALT deduction cap and elimination of personal exemptions might also be reconsidered as part of a Congressional negotiation.

Qualified Dividends and Capital Gains:

The TCJA lowered taxes on long-term capital gains by setting up separate tax brackets for assets held longer than one year, and for qualified dividends. The rates remain the same at 0%, 15%, and 20%. The act also retained the 3.8% net investment income tax for higher-income people. There has been some discussion among Republican tax policy experts about making the top rate 15% and eliminating the net investment income tax.

Child Tax Credit:

Vice President-elect J.D. Vance has expressed support for increasing the credit to $5,000 per child. The caregiver credit in a speech in Madison Square Garden in October, Trump proposed a new tax credit for family caregivers taking care of parents or loved ones.

Estate Taxes:

Trump has expressed support for extending the 2017 TCJA changes in the estate tax exemption which doubled to their existing levels of $13.61 million for single people, $27.22 million for couples compared to 2016. Without an extension, the estate tax would return to its pre-2017 levels, which is approximately half of what it is today.

Social Security Benefits:

Trump has proposed eliminating all taxes on Social Security benefits. Currently up to 85% of benefits are taxed for single filers with incomes above $34,000, or married filing jointly couples with combined income of $44,000.

Corporate Tax Rates:

Trump has expressed support for lowering corporate taxes to 15% from the 21% rate.

Tariffs:

President Trump is a self-described "tariff man," where he will use tariffs to punish countries who are not playing fairly and to protect American products. I have little doubt that he will assess tariffs, especially to a country like China, who steals intellectual property and seems to play by their own rules.

[Practical Planning Tips]

Here's a practical planning tip: When it comes to taxes, remember that the future is unpredictable. While we assume Trump will lower taxes, tax policy is still uncertain. Therefore, embracing an approach of proactive tax mitigation strategies, like the items I mentioned, makes sense.

In terms of tariffs, the stock market is the best way to outpace the inflationary environment over time that may be caused by tariffs. Make sure to incorporate that into your portfolio.

[General Thoughts on Election Outcomes and Investing]

Finally, I thought I would conclude with some general thoughts on the election outcome and what investors would need to think about going forward. Here are 8 points to consider:

Your Emotions

Making drastic decisions based on who's in the White House is always the wrong approach. I remember that before the 2008 election I had a friend tell me that if Obama won he would liquidate his entire portfolio and flee the country. During the 2016 election, I had a colleague tell me they would move their clients' portfolio to cash if Trump won. Both decisions turned out to be incorrect as the markets hit all-time highs during each of their presidencies. The same is true today, with the markets also hitting all-time highs under a Biden Presidency.

Don't Try to Time the Market

No one knows how the markets will perform in the short term, and in many cases timing the market for exit and then reentry simply results in selling low and buying high. Historically, the best and worst trading days have tended to be close together. Investors who try to correctly time both a market exit and a return run the risk of missing out on strong performance and impairing their long-term investment success.

Don't Bet on Certain Sectors

Given the rhetoric of each party, investors would assume that certain industries should perform better based on who's in office. Unfortunately, this doesn't always play out in the real world. For instance, under Republican administration, the "drill baby drill" mantra - many believed that traditional energy companies would thrive while clean energy stocks would plummet. Interestingly, the exact opposite occurred when Trump was in office. On the flip side, under the Biden administration, oil and gas stocks boomed while clean energy companies fell. One's investment thesis does not always work out as neatly, no matter how logical it seems.

Consider Portfolio Guardrails

Not everyone has monk-like self-control, allowing them to stay totally unemotional during Presidential election years. Instead of trying to suppress the desire to act, you can open up a small "cowboy account." This account should be limited to 5% or less of your investable assets and can be used to go wild on any gamble you wish. This will allow investors to satisfy their urge to speculate based on politics while keeping their serious money insulated from imprudent decisions.

Keep the Historical Context in Mind

Making investment decisions with a broader context is best practice. Therefore, understanding history is imperative when it comes to structuring a sensible portfolio. Since the end of World War II, the S&P 500 has returned over 11% per year when including dividends. If you want a more risk-averse point of view, this may hit home: A portfolio of 60% equities with 40% fixed income has produced an annual compound return of 8.1% since 1860 with a Republican President and 7.8% annual compound return with a Democratic President. I always try to emphasize to clients that if they stick with their strategy over the long term and remain overweight in stocks, they will likely be happy with the results, regardless of who's in the White House.

Do Review Planning Opportunities

The previous 30 minutes of this webinar discuss various financial, estate, and tax planning opportunities to consider. These opportunities will likely be far more impactful to your wealth than speculating on the market.

Do Focus on What You Can Control

This is a good lesson for markets and in life. Investors are well served by focusing on the things that they can control, like maintaining a high savings rate, keeping a diversified mix of investments, being tax conscious, staying disciplined, and maintaining long-term perspective. These principles are timeless and especially useful in times such as these.

Do Ignore the Noise

Most of the news and content disseminated during an election year is narishkeit, as we say in Yiddish, or total nonsense. It's just a way for various news networks and influencers to get more engagement during these emotionally challenging times. Your investment North Star should be this mantra: politics and your portfolio don't mix.

[Closing Remarks]

And with that this concludes today's program. Should you have any follow-up questions, you can reach me at jonathan@parkbridgewealth.com. Email is generally the best way to get a hold of me.

Three more quick items:

- My webinar series continues on Thursday, December 12th featuring Boaz Feinberg, partner at Arnold Tadmore Leavery, speaking on international taxation law in Israel

- You can follow my work on X and Instagram at Jonathan on Money, listen to my podcast, and watch my practical planning videos on YouTube

- Please take 30 seconds to fill out my survey at the end of this program to help improve future webinars

Please stay safe and healthy and have a wonderful day everybody!