7 Steps – 2015 Year End Tax Planning


If you are like me, you are either retired or close to it. One quick shock on the day you retire is that you no longer have that pay check you’ve been use to getting most of your adult life. If you’ve done a good job of planned your retirement in advanced you can be celebrating instead of worrying. While in retirement you can set new goals, one of might be to pay the smallest amount of federal income tax as possible. Is it possible to appear “poor on paper” yet live a comfortable lifestyle? Yes!

Here are some items for your consideration.

  1. Manage your 2015 tax bracket. For example, if you just started receiving Social Security this year, consider returning it and delaying payments till you are 70 ½. There is no penalty for doing this. Some of this will be taxable. This might give you a chance to live off savings (cash) while paying little if any tax.
  2. Contribute the maximum amount you can to an HSA account, this will provide a credit to your Taxable Income.
  3. If possible, maximize your deductible items such as medical expenses by getting those new eye glasses, dental cleaning and so forth this year instead of early next year. Consider prepaying your property taxes.
  4. One big issue can be stock market opportunities in your taxable account. With the recent volatility in the market consider selling stocks, ETF’s or fund’s with short-term losses. These losses can then offset gains. You can also carry forward a maximum of $3,000 into future years. Just make sure you watch out for a “Wash Sale” on stocks sold for a loss if you put this money back to work in the market. When you use a loss to offset a gain you also get the benefit of re-setting your “cost basis” for the stock. This will benefit you if you buy back and then sell this stock for a gain in the future.
  5. Also regarding your taxable brokerage account, try and maintain “qualified-dividend” stocks which get preferred tax treatment or no tax at all if you can find a way to stay in the 15% tax bracket. Keep in mind that if you are in the 10% or 15% tax bracket there is 0% tax on “qualified dividends” and Long Term Capital Gains.
  6. If you’ve done a good job being “poor on paper”, you can also convert some of your IRA into a Roth IRA. Just keep an eye of your plan so that you don’t jump into a higher tax bracket.
  7. If you hold Equity Mutual Funds watch for the December “Distribution Date”, consider selling before that date if a large capital gain is expected. Otherwise you will be surprised by paying tax on a distribution you don’t actually get (the fund price, in theory is lowered by the distribution amount).





The Right Way to Buy Stocks and ETF’s

In an earlier post I discussed how to avoid problems when buying Mutual Funds. In this posting I’ll discuss the best way to but stocks and ETF’s.

 Let’s examine how people normally buy a stock or ETF, they just enter the number of shares and hit “Buy”. This is what is called a “Market Order”. You agree to buy at whatever the current “ASK” price is. Here are some suggestions on how to buy at the right price regardless if you are a short term or long term investor. 

Do not place a buy or sell order after hours or over a weekend. Early morning volatility can be huge. Large institutional blocks can get moved during the 1st and last hour of trading every day. This results in the little investor, you and me getting our orders priced at a less preferred level. Take a look at recent Apple trading ranges in just 1 day.


Here is a morning spread showing market large gaps between the “Buy and Sell” prices for a common stock.


Always use “Limit Orders” when buying and selling. A Limit Order allows you to specify an exact price you want to buy or sell at. It provides some level of protection. For a long term investor you can easily place an order for your “watch list” stock at a recent low and just wait for the price to come down. You can choose “good till canceled” GTC to wait for your price.

Here is an example of a Limit Order.

Limit Buy



Warning – Understand Cut-Off Times When Buying Mutual Funds


A lot of investors in the last week or so have been very disappointed when they tried to buy mutual funds late in the day to capture great bargains, only to find out they didn’t get them. 

Here is what you need to know. Mutual Funds are priced every day at 4PM. You decide that want to buy 100 shares of a mutual fund and you place an order at 3PM, one hour before the market closes. The current price that day, the NAV was down to $100/share, you think you just paid $10,000. However, you check back a few days later and notice that the “buy” price was actually $110/share, 10% higher. How could this happen? Easy, you need to understand the CUT-Off time for both your broker and the actual fund.  

For example, here is the policy on the Ameritrade web site. Trading Cutoff Times “Cut-off times for the purchase and redemption of mutual fund shares can vary from 2 p.m. ET to 4 p.m. ET, and are subject to change at any time. Orders placed after the cut-off time will be processed the following business day” 

So you might place a mutual fund order at 2PM on September 8th, thinking you’ll get the 4PM price that day, however you might actually get the 4PM price on September 9th at 4PM. In the meantime the market has either dropped or rallied substantially. 

Stocks and ETF’s are not like this, they are priced and confirmed within seconds of order execution. Actual Bond are altogether different and much more mysterious.