Insights: year-end thoughts

YEAR-END THOUGHTS, PART 2

On a recent social Zoom call, a friend offered a stark reminder of the scope of this pandemic’s tragedy— total US Covid deaths are now more than 100 times the fatalities suffered on 9/11.  As a fellow New Yorker present in the City at that time, I had to take pause, unsure whether anyone can ever fully appreciate the impact on over 300,000 families across this country. It seems our daily compass vacillates between a collective sense of sadness and one of nagging frustration with recalcitrant attitudes towards public health measures.  Compounding this mental fog, the nation’s ongoing political discord has proved difficult for most to ignore.

Given this onslaught of unprecedented factors, it is not surprising that one may fall prone to cynicism and inaction.  To break with this loop of unproductive feedback, I believe a reorientation towards an internal locus of control is critical.  Indeed, a renewed perspective is essentially the “holy grail” of my year-end meetings with clients—focusing on retooling financial variables within their control, after listening with deliberate intent about their worries and wishes.

So, what should be on this “call-to-action” list as we look towards the New Year? 

• Protection: On top of the thorough review of estate planning documents referenced in Part 1, 2020 illustrates moreover the importance of having various types of insurance to hedge against unforeseen risks;
• Cash Flow: In a year when millions have lost employment, it pays to ensure the adequacy of the “rainy day” account, and to reassess monthly expenses vs. income. Only when there is positive cash flow can one hope to build assets;
• Taxes: In addition to the usual tax-loss harvesting exercise at year-end, tactical and strategic planning opportunities may exist as a result of the 2019 SECURE Act (e.g., how to mitigate the required 10-year distribution rule for non-spouse beneficiaries of tax-deferred retirement accounts), and 2020 CARES Act (e.g., for those who took distributions or loans from retirement plans as a result of Covid hardships);
• Growth: Given the market’s gyrations, it is also essential to examine whether the overall asset allocation has deviated from your appropriate positioning such that these accounts warrant rebalancing;
• Charity: Taxpayers can take advantage of a one-time “above-the-line” deduction of up to $300 for cash donations to eligible charities, in 2020, and consider donating appreciated stocks to minimize capital gains. For those interested in engaging in philanthropy on a sustained basis, one increasingly popular vehicle is donor advised funds. 

Happy Holidays, and, in the inestimably motivational words of Grandmaster Yoda:

“Do. Or Do Not. There’s No Try.”

YEAR-END THOUGHTS, PART 1

As we fast approach year’s end, the daily rhythm of our lives seems hijacked by an ever growing checklist– charitable giving decisions, gathering ingredients for that “one” holiday recipe from childhood, and posting holiday greetings, just to name a few.

Yet, more so than years past, one’s particularly drawn to take careful stock of 2020, even as we all eagerly await 2021.  It is in this spirit of introspection that I share the poignant implications of the death of Tony Hsieh, the Taiwanese American founder/ex-CEO of Zappos.  According to one report, Hsieh, who passed recently at age 46, left behind an estate of $800MM without a will, thus forcing his family to sort out the entangled legal web.

Undoubtedly, Hsieh’s example is an extreme one.  

It is, however, no less useful in illustrating the importance of estate planning documents in any financial planning, before you contemplate any other aspects of your financial life.  Even if you’re way ahead on this curve, dust off those documents to ensure they remain valid in reflecting your current wishes.  If nothing else, 2020 should have taught each of us “black swan” events are perhaps not as exotic as one may have thought.