GMB Ep #99: Maximizing Workplace Benefits With FSAs and HSAs

 

The open enrollment period for Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) is approaching. During the enrollment period, employees can enroll in or amend their contributions for the future year for FSAs and HSAs, which they can use to pay for their healthcare-related expenses. We dedicated today’s episode to taking a deep dive into several vital facts related to FSA, Dependent care FSA, HSA, and the numerous ways to maximize your workplace benefits under each of them. 

 

 

Show Notes

[04:37] Flexible Spending Account (FSA) – Grant explains what FSA means, how it works, and who can contribute.  

[07:55] Plan the Health Expenses – Why it is essential to forecast the health expenses to pay them on a tax-deferred basis through FSA versus paying out of pocket. 

[09:18] Spend the Fund at Pharmacy – Beneficial features of FSAs, such as the ability to spend the funds at a pharmacy, and why having this option is significant. 

[10:10] Dependent Care FSA – Grant explains the purpose of a Dependent Care FSA, its benefits, and several facts to keep in mind if you are considering using one. 

[15:30] HSA – How to contribute to and HSA and the fantastic tax benefits and investment opportunities that come along with it 

[19:12] Eligibility for HSA – Grant explains the eligibility requirements for HSAs, including having a High-Deductible Health Plan (HDHP). 

[26:00] Connection to the employer – Grant discusses the connection between your HSA and your employer, and why employees can take their balance with them when they’re switching employers. 

 

Resources

What Is a Flexible Spending Account (FSA)?
investopedia.com/terms/f/flexiblespendingaccount.asp 

 

What Is a Health Savings Account (HSA)?
investopedia.com/terms/h/hsa.asp 

GMB Ep #97: My Current Thinking on Cryptocurrency

 

A lot has happened in the cryptocurrency arena since we last covered this topic on Grow Money Business. Last week China announced that they are banning all activities in cryptocurrency while a month ago, El-Salvador announced that it would accept Bitcoin as a legal tender. In today’s episode, Grant shares his current thoughts and observations on cryptocurrency-related developments in the United States and around the world.

 

 

Show Notes

[02:46] Recent Events – Grant starts the conversation by briefly explaining the impact of both China and El Salvador’s approaches to using cryptocurrency.

[05:17] Benefits of Cryptocurrency – The benefits of cryptocurrency and why it is an appealing and convenient alternative for existing currency issues.

[07:05] Growing Chinese Economy – Grant compares the pace of China’s economic growth to the USA and reviews its intention of overtaking the USA as a world economic power.

[08:50] World Reserve Currency – Grant dives into the world reserve currency from numerous perspectives, including economic privileges that it opens for certain countries and why the USA needs US dollars as the world reserve currency.

[12:45] China and Cryptocurrency – The cryptocurrency activities in China before the government-imposed ban and Grant’s take on the reasons behind that government action.

[14:46] El Salvador and Cryptocurrency – El Salvador’s economic background and impacts on the country’s social context by encouraging citizens to transact in Bitcoin.

[15:52] Benefits and Challenges for El Salvador – The possible future occurrences related to cryptocurrency, as well as Grant’s take on the probable risks and benefits El Salvador may experience with the decision to accept cryptocurrency.

[18:40] Future Cryptocurrency Approach of Countries – The future measures of the world, and how China’s recent decision has knocked the price of cryptocurrencies.

[21:00] Increasing Credibility and Viability of Cryptocurrency – Grant explains the widespread adoption of cryptocurrency at the institutional level and how it has enhanced the credibility and viability of cryptocurrencies.

[22:58] Bitcoin and Ethereum – Cryptocurrency consists of numerous types of coins, including Bitcoins and Ethereum. Grant reveals his thoughts on the benefits and usage of each.

[28:01] Conclusion – Grant sums up his takes on recent changes of monetary and economic policies related to cryptocurrency and how countries will decide and set rules regarding cryptocurrency in the coming future.

 

Resources

Ep #65 – My Take on Bitcoin & Cryptocurrency

growmoneybusiness.libsyn.com/website/ep-65-my-take-on-bitcoin-cryptocurrency

Ep #64 – Where to Invest an Extra $50,000 Right Now

growmoneybusiness.libsyn.com/website/ep-64-where-to-invest-an-extra-50000-right-now

JPMorgan Warns Big Investors Are Suddenly Dumping Bitcoin for Ethereum Amid A $150 Billion Crypto Price Crash:

forbes.com/sites/billybambrough/2021/09/26/big-investors-are-suddenly-dumping-bitcoin

China’s top regulators ban crypto trading and mining, sending bitcoin tumbling:

reuters.com/world/china/china-central-bank-vows-crackdown-cryptocurrency-trading

GMB Ep #95: We Have a New Tax Bill [And It’s a Whopper]

 

The House Ways & Means Committee recently released proposed tax reform legislation that brings major changes to the current levels of taxation, including reversals of several provisions introduced in the Tax Cuts and Jobs Act of 2017. We dedicated this episode to exploring what this new proposal includes and some of the key aspects of the proposal that may interest our listeners. Throughout the episode, Grant dives deep into proposed provisions related to retirement, new tax brackets, business tax, tax on cryptocurrency, estate planning, and more.

 

 

Show Notes

[02:19] Background and Progress – Grant starts the conversation with a brief review of what led to this new proposed piece of legislation, its current status, and the path to getting it signed into law.

[08:16] Roth IRA Conversions – The proposed tax bill calls to prohibit Roth IRA conversions on after-tax contributions, which has been a very convenient maneuver for tax planning. Grant shares his thoughts on what to keep in mind if you’re considering a Roth IRA conversion.

[12:35] High-Income Earners – The new tax bill also brings provisions to restrict high-income earners from doing any Roth IRA conversions starting from 2031. Grant dives into the reasoning behind this, why this provision is proposed to come into effect ten years from now, and some other restrictions that apply to high-income earners.

[16:27] Mandatory Distributions – How the proposed new legislation mandates taking money out of your retirement accounts if the total value of all your retirement accounts exceeds a given threshold.

[20:00] Tax Brackets and Rates – Grant dives into how the tax brackets and applicable tax rates are updated in the proposed legislation and proposed changes to taxation on capital gains.

[27:47] Ultra-high Income – Grant shares his take on the 3 percent surtax proposed to apply for people who make over $5 million.

[29:47] Surtax on Trusts – The proposed legislation also brings provisions to add a surtax on trusts. Grant talks about the proposed tax brackets and rates related to trusts and what you should keep in mind when considering estate planning.

[31:08] Business Tax – How the proposed tax bill affects businesses depending on the type of business entity and some of the planning opportunities that emerge with the new proposal.

[35:35] Business Income Deductions – The new proposed legislation reforms a set of provisions related to business deductions that are introduced in the Tax Cuts and Jobs Act of 2017. Grant explains some of these reforms and what business owners should keep in mind about tax planning.

[39:02] Cryptocurrency Assets – Some of the tax-related legislations that apply to other assets such as stocks and bonds do not currently apply to cryptocurrency assets. Grant shares his thoughts on how that may change in the new proposed tax bill and what crypto investors show know about the new tax bill.

[42:26] Estate Planning – Another provision in the proposed tax bill brings some significant changes to taxes related to estate planning. Grant dives into what these updates include and what you should keep in mind about taking advantage of the current thresholds and exemptions.

 

Resources

https://waysandmeans.house.gov/media-center/press-releases/chairman-neal-announces-additional-days-markup-build-back-better-act

GMB Ep #94: 4 Tactics for Reducing Capital Gains Taxes on Appreciated Assets

 

Following the financial crisis of 2009, we entered one of the longest running bull markets in history. During this time, the Federal Reserve has injected a massive amount of US dollars into the monetary system, which has driven up the value of capital assets across the board. If you’re someone who holds equities or other assets at a substantial gain, you might be hesitant to sell them because of tax concerns. In today’s episode, Grant dives into four strategies you can use for exposure to appreciated assets and/or taxation when selling at a gain.

 

 

Show Notes

[02:29] Concentration and Risk – Why it’s risky to hold on to assets for too long and why it can be beneficial to repurpose your assets at the right time.

[07:57] Exchange Fund – Exchange funds can be used to diversify your holdings without triggering a taxable event. Grant shares his thoughts on the pros and cons of this method.

[13:28] Options – How to use stock options to reduce the risk of losing the value of your holdings during price fluctuations.

[20:05] Donor-advised Funds – Grant explores how donor-advised funds work and how investors can get tax benefits while contributing to charity.

[28:58] Charitable Remainder Trust – How charitable remainder trusts work, how they differ from donor-advised funds, and how to get started with them.

[34:38] Family & Insurance –Grant shares some ways you can reinvest the benefits of a charitable remainder trust to avoid financial stress within your family.

 

Resources

Donor-Advised Funds:
irs.gov/charities-non-profits/charitable-organizations/donor-advised-funds

Convert Appreciated Assets into Income with a Charitable Remainder Trust:
schwabcharitable.org/maximize-your-impact/develop-a-giving-strategy/align-your-giving-vehicles/charitable-remainder-trust

GMB Ep #92: Money Funds & Where to Park Your Emergency Cash

 

You are probably already familiar with the concept of reserving an emergency fund for unexpected expenses.  You may even already have one in place.  However, deciding how much to reserve or where to keep this money can be tricky.  We dedicated this episode to exploring why you should maintain an emergency fund, how to determine how large yours should be, and a few different savings options that can be safe & accessible, while still giving you the greatest possible returns.

 

 

Show Notes

[02:09] Managing Emergency Cash – Why it’s crucial for everyone to set aside some emergency funds and the importance of keeping your cash in the right place.

[05:23] How Much to Save – Grant shares a method of estimating how much you should save as an emergency fund based on your income, expenses, and risk tolerance.

[08:31] Too Much in Cash – Why it’s a better idea to have your emergency savings as investments and the ideal investment method for your funds.

[12:17] CD Ladder & High Yield Savings – Grant explains how using multiple Certificates of Deposits and high yield savings accounts can help you make the most out of your emergency cash.

[16:36] Money Market Mutual Funds – How money market mutual funds work, how they’re different from money market savings accounts, and some of the recent reforms related to money market mutual funds.

[24:14] Types of Money Market Funds – How the reforms led to the creation of two types of money market funds, the differences between the two types, and what you should keep in mind about parking your emergency cash in a money market fund.

[28:24] Government Funds – The feasibility of putting your emergency cash in government funds and the benefits of utilizing multiple methods of investments.

 

Resources

Money-Market Funds Buckled in Two Crises in a Row. Regulators Look to Fix Them Again:
wsj.com/articles/money-market-funds-buckled-in-two-crises-in-a-row-regulators-look-to-fix-them-again-11626687001

Firms Wary as Money-Market Rule Changes Studied After Covid-19 Run:
wsj.com/articles/firms-wary-as-money-market-rule-changes-studied-after-covid-19-run-11630056602

GMB Ep #91: Why Mutual Fund Managers Are Converting to ETFs

 

One of the trends we’ve been recently observing is the tendency of mutual fund managers to convert their fund structure to Exchange-Traded Funds. Throughout this episode, Grant reviews the structures of mutual funds and ETFs, what makes them different from each other, the reasons why it makes sense for mutual fund managers to switch to ETFs, and what investors should keep in mind about mutual funds being converted to ETFs.

 

 

Show Notes

[01:43] Mutual Funds – Grant reviews how mutual funds are structured and how the mutual fund managers use funds from a group of investors to generate greater returns than what individual investors have the capacity to generate on their own.

[08:42] Limitations – Limitation of mutual funds and how these limitations may create unfavorable situations for mutual fund managers in some scenarios.

[13:50] Understanding ETFs – What led to the creation of Exchange-traded Funds, how they work, and the difference between mutual funds and ETFs.

[21:51] Benefits – Grant dives into the attractive characteristics and tax benefits of exchange-traded funds.

[25:00] Popularity of ETFs – Grant shares his thoughts on how ETFs became popular in the last decade and the trend of some mutual funds being converted to ETFs.

[30:00] Why Investors Should Care – How this trend of mutual fund managers converting their structure to ETFs affects the investors in terms of expenses, taxation, benefits, and what to do if their mutual funds are being converted.

 

Resources

Investor Bulletin: Mutual Fund Conversion to Exchange-Traded Fund (ETF):
investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/mutual-fund-conversion-exchange-traded-fund

Making the Switch: Turning a Mutual Fund into an Exchange-Traded Fund:
bbh.com/us/en/insights/investor-services-insights/making-the-switch-turning-a-mutual-fund-into-an-exchangetraded.html

GMB Ep #90: This is Exactly What to Do With Your Student Loans

 

With roughly 44 million borrowers that collectively owe nearly $1.7 trillion, student loans, the second-highest consumer debt category, has become something that’s pervasive for young people in the United States. We dedicated this episode to exploring some of the ways borrowers can make their student loan repayment manageable. Throughout the episode, Grant dives into how the interest rates and other characteristics vary depending on the lender, repayment options, income-based repayment, federal student loan forgiveness, and more. Stay tuned until the end of the episode, where Grant shares some strategies to reduce your monthly payments by suppressing your adjusted gross income.

 

 

Show Notes

[01:43] Background – The pervasive nature of the U.S. student loan programs and why they have become pervasive.

[05:10] Who Lent You the Money – Grant explains how the interest rates and repayment options may vary depending on the institution that is underwriting a student loan.

[07:38] Repayment & Refinancing – Once students have graduated and their forbearance period has finished, it’s time to paying back the student loans. Grant explores some of the options available for students at this point and how to decide whether to refinance with a private lender.

[10:19] Staying in the Federal System – Although it might make sense in some cases to refinance with a private lender, staying in the federal system has its own benefits. We talk about what these benefits are and how students can take advantage of staying in the federal system.

[13:07] Income-based Repayment – How the income-based repayment programs work, requirements for eligibility, and how they help people make their monthly payments manageable.

[18:13] Forgiveness – One of the features in income based-repayment is being able to get your debt forgiven after a certain number of years. Grant dives deep into how debt forgiveness works, how taxation comes into play at the point when the debt is forgiven, and what to consider when deciding whether to pursue forgiveness.

[22:32] Administrative Forbearance – As a part of the stimulus package introduced under the CARES Act, an additional forbearance period was introduced for student loans. Grant shares his thoughts on how to take this into consideration when making decisions about student loan repayment.

[27:15] Strategy for the Federal System – Grant shares some strategies for those who are in the federal system to make loan payments manageable by suppressing their adjusted gross income.

 

Resources

Episode #34: Why College Is So Expensive & How to Pay For It With Robert Farrington:

https://podcasts.google.com/feed/aHR0cHM6Ly9ncm93bW9

Market Review: Q3 2021

Market Update: Q3 2021

Even though the delta variant has many areas reconsidering reopening & masking protocol, the world’s economic rebound is in full force.  The U.S. economy added 943,000 jobs in July, unemployment fell to 5.4% from 5.9%, and global earnings estimates continue being revised upward.  These are all positive themes.

The underlying theme giving some investors pause is inflation.  Monthly inflation numbers have continued to lurch upward, despite the Federal Reserve’s insistency that it’s “transitory”.

Will prices continue higher?  They could.  We just passed a $3.5 trillion bill immediately after a $1 trillion infrastructure bill.  This type of fiscal policy injects a whole lot of dollars into and through the banking system that we’ll have to borrow to finance.  With more dollars chasing the same amount of goods and services available, prices tend to get pushed up.

But then again, many of the price increases we’ve seen recently are supply chain oriented.  Computer chip shortages have driven up used car prices.  Lumber costs are still high as there’s simply not enough available to supply the glut of home improvement projects.  The common thread here is that factories and manufacturing facilities are still crawling back to full capacity.  Many workers used the pandemic as an opportunity to change careers or jobs.  Some decided not to go back to work at all.  So while prices of the goods & services we all enjoy do continue to march higher, the real question will be what happens once capacity is truly back at full strength.

Here’s this quarter’s market review.

 

Market Review: Q3 2021
Market Review: Q3 2021

Market Review: Q3 2021

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GMB Ep #89: Investing Myths #4 – U.S. Multinationals Provide Enough International Exposure

This week on the podcast, we’re continuing our mini-series dedicated to debunking popular misconceptions around investing by exploring the truth about whether U.S. multinational securities provide enough international exposure for your portfolio. Throughout today’s episode, we will dive deep into why international exposure benefits investors, how the differences of key aspects between the U.S economy and other countries influence the returns of an investment, methods of accurately evaluating the potential of foreign investments, and how you can avoid some of the biases that will negatively affect our financial decision making.

Show Notes

[2:50] Diversification – Why people feel that they have ample diversification in their portfolios and what they’re missing out on by only investing in U.S. corporations.

[04:00] U.S. Economy vs. Other Countries – Grant reviews some key aspects of world economies that make some other countries, such as China, grow rapidly in comparison to the United States.

[9:40] P/E Ratio – Grant explains what the P/E ratio is, how you can use cyclically-adjusted P/E ratio to assess the potential returns of stocks, and why it is better than just looking at the historical performance of stocks.

[16:14] Correlations – Securities markets have some trends and behaviors that show correlations between U.S securities and foreign securities. Grant talks about why investors should invest in international securities despite these correlations.

[21:05] Diversification of Currency – Grant explains why investing in companies that do business transactions in a diverse selection of currencies can be beneficial to investors in the long term.

[22:52] Dealing with Biases – How certain psychological characteristics of the human brain can get in the way of making savvy investment decisions and how to avoid these traps.

Resources

Morningstar: Does International-Stock Diversification Still Work?
morningstar.com/articles/1034112/does-international-stock-diversification-still-work

Hartford Funds Chart on the Performance of International Stocks:
hartfordfunds.com/dam/en/docs/pub/whitepapers/CCWP014.pdf

The Wall Street Journal – Why It Might Be Time to Invest in Non-U.S. Stocks:
wsj.com/articles/why-it-might-be-time-to-invest-in-non-u-s-stocks-11596900477

GMB Ep #88: How Securities Lending Drives Down Investment Costs

 

Securities lending is one of the widely misunderstood concepts in the investment community, and securities lending shows up intermittently in the news for both positive and negative reasons. However, this complex trading pattern driven by short selling can drive down costs for the investors. In today’s episode, Grant dives deep into how securities lending works, the different parties involved in it and their roles, how investors participate in securities lending, and how it impacts the performance and costs of ETFs and mutual funds.

 

 

Show Notes

[02:40] Understanding Securities Lending – How securities lending works, how it relates to investment funds that many people put their money in, and how it generates revenue for brokerage firms.

[07:13] Trading Settlement – The process of trading securities is a bit more complex than it looks from the outside. Grant reviews how trade settlements work and how securities lending comes into play.

[12:50] Short-Squeeze – How unexpected fluctuations in stock price can cause investors to lose money in certain scenarios.

[13:47] Driven by Short Selling – Grant reviews how securities lending transactions between several parties create a complex ecosystem that facilitates short selling and how the demand for securities lending is driven by short selling.

[16:23] Supply and Demand – How brokerage firms can make money through securities lending depending on the demand for shares.

[19:10] Sources of Supply – Grant explains the sources brokerage firms use to get the securities they lend to other parties and how investors can make money by lending securities to brokerage firms in some scenarios.

[21:40] ETFs and Mutual Funds – How ETFs and mutual funds are involved in securities lending as another source of supply and how it benefits investors by reducing expenses.

[27:20] Facilitating Short Selling – A common argument about securities lending is that you may not want your shares to be lent out because you don’t want to facilitate short selling in a company that you own. Grant shares his take on the relevance of this idea.

 

Resources

My Take On Short Selling: www.abovethecanopy.us/my-take-on-short-selling/