GameStop and Heavily Shorted Stocks EXPLAINED

As many of you probably already know, Wall Street was been flipped upside down this week. For those who don’t, what happened? 

Well, this past week, we saw the most heavily shorted names on Wall Street sky rocket to start the year. Most notably, we saw monster moves in short squeeze stocks like GameStop, AMC, Express, Nokia and Blackberry. How did this happen? Will Wall Street Hedge Funds Recover? Will this Continue? Want more details on Reddit? Robinhood? Need help on what to do next? 

Check out our most recent Youtube video to see Brad’s explanation of this wild roller coaster we are seeing in the stock market. As always, let us know if you have any questions or would like to have a more in-depth discussion surrounding these events. If so, please book a free 30-minute consultation on our site. 

Click here to watch the video: https://youtu.be/2ymN8AdCfo0

Amid the Crises in 2020, DAFs Continued to Expand

Despite the coronavirus pandemic, 2020 was another fantastic and charitable year for donor-advised funds (DAFs). When the markets initially plunged and fundraisers were no longer allowed to happen in person, DAF donors stepped up to support both their favorite charities and others that addressed critical needs.

When markets bounced back, donors continued to give, and year-end giving was again strong, which is something we love to see. 

Charitable Planning

As an advisor, we play a large part in helping our clients plan their charitable giving. Regardless of who donated, it was truly amazing to see that despite a global pandemic, people who were in the position to do so remained charitably inclined. At Sherman Wealth, we always stress the importance of giving back to the community, especially when you are in a financial position to do so. If you are considering giving back or donating to your favorite charity, please reach out to us with any questions you may have on going about your charitable giving. We are happy to help in any way or discuss your options in a free 30-minute consultation on our site. 

 

 

Definitive Guide To Your 2021 Tax Return

The IRS has tons of rules and forms when it comes to your tax return. And a ton of those rules affect investing for retirement, so we rounded them up in one place. Below are some of the many limits that affect your retirement savings for the 2021 tax year. Click here for this downloadable pdf.

Contribution limits on retirement accounts

Annual 401(k) contribution limit

$19,500 if you’re under 50 years old, and $26,000 if you’re over 50. If you have both a traditional and a Roth 401(k), that’s the total limit you can contribute across both accounts.

Annual IRA contribution limit

$6,000 if you’re under 50, and $7,000 if you’re over 50. Again, this is the total contribution limit across both traditional and Roth IRAs.

Annual SEP IRA and Solo 401(k) contribution limits

25% of your “net earnings from self-employment” or $58,000, whichever is lower.

Annual SIMPLE IRA and SIMPLE 401(k) contribution limits

$13,500 if you’re under 50, and $16,500 if you’re over 50. (Btw, these count toward your overall 401(k) contribution limit, too.)

Income limits to contribute to a Roth IRA

Depending on your modified adjusted gross income (MAGI), you might be partially or fully ineligible to contribute to a Roth IRA. Note that these limits don’t apply to Roth 401(k)s. (Those don’t have income limits at all.)

If your filing status is single, head of household, or married filing separately

If your MAGI is over $140,000, you can’t contribute to a Roth IRA. If it’s between $125,000 and $140,000, you can contribute a reduced amount. And if it’s less than $125,000, you can contribute up to the full $6,000 / $7,000 limit.

Except: If your status is married filing separately and you lived with your spouse at any time during the year, you can’t use a Roth IRA if your MAGI is over $10,000. If it’s under $10,000, you can contribute a reduced amount.

If your filing status is married filing jointly or qualifying widow(er)

If your MAGI is over $208,000, you can’t contribute to a Roth IRA. If it’s between $198,000 and $208,000, you can contribute a reduced amount. And if it’s less than $198,000, you can contribute up to the full $6,000 / $7,000 limit.

Income limits to deduct traditional IRA contributions

Anyone with an earned income (investment income doesn’t count) can contribute to a traditional IRA up to the limit. If your MAGI is greater than a certain amount, you may be partially or fully ineligible to deduct them on your tax return, though.

If you are covered by a retirement plan at work (ie 401(k), SEP IRA)

If your filing status is single or head of household

If your MAGI is over $76,000, you can’t deduct your traditional IRA contributions. If it’s between $66,000 and $76,000, you can deduct a reduced amount. And if it’s less than $66,000, you can deduct up to the full $6,000 / $7,000 contribution limit.

If your filing status is married filing jointly or qualifying widow(er)

If your MAGI is over $125,000, you can’t deduct your traditional IRA contributions. If it’s between $105,000 and $125,000, you can deduct a reduced amount. And if it’s less than $105,000, you can deduct up to the full $6,000 / $7,000 contribution limit.

If your filing status is married filing separately

If your MAGI is over $10,000, you can’t deduct your traditional IRA contributions. If it’s under $10,000, you can deduct a reduced amount.

If you aren’t covered by a retirement plan at work (ie, 401(k), SEP IRA)

If your filing status is single, head of household, or qualifying widow(er)

None. You can deduct up to the full $6,000 / $7,000 contribution limit.

If your filing status is married filing jointly or separately

If neither you nor your spouse is covered by a retirement plan at work, there’s no income limit. You can deduct up to the full $6,000 / $7,000 contribution limit.

But say your spouse is covered by a retirement plan at work:

  • If you file jointly and your MAGI is over $208,000, you can’t deduct your traditional IRA contributions. If it’s between $198,000 and $208,000, you can deduct a reduced amount. And if it’s less than $198,000, you can deduct up to the full $6,000 / $7,000 contribution limit.
  • If you file separately and your MAGI is over $10,000, you can’t deduct your traditional IRA contributions. If it’s under $10,000, you can deduct a reduced amount.

Limit on indirect IRA rollovers per year

You can’t do an indirect rollover from one IRA into another IRA more than once a year. That’s not once per calendar year, or even once per tax year — it’s once per rolling 12-month period.

This applies whether it’s traditional-to-traditional or Roth-to-Roth. However, direct rollovers don’t count, and traditional-to-Roth conversions don’t count. (Neither do rollovers from your employer retirement plan, like a 401(k) — those are different.)

Age limits on retirement accounts

There’s no age limit on IRAs. But you do have to stop contributing to your other tax-advantaged retirement accounts when you hit age 70½ — unless you’re still working, in which case you can keep contributing to a plan that’s sponsored by that employer.

And at age 72, you have to start taking required minimum distributions (RMDs) from your retirement accounts (except for Roth IRAs — no RMDs on those). If you’re still working, RMDs on non-IRA retirement accounts can be waived, unless you own 5% or more of the company that employs you. (The CARES Act waived all RMDs for 2020, but 2021 RMDs seem to be back on. We’ll update this page in the event that changes.)

Those are the limits you need to know about. Now go forth and invest for that dream retirement.

Disclosures:

Sherman Wealth Management LLC (“Sherman Wealth”) is a Registered Investment Advisor (“RIA”), located in the State of Maryland. Sherman Wealth provides asset management and related services for clients nationally. Sherman Wealth will maintain all applicable registration and licenses as required by the various states in which Sherman Wealth conducts business, as applicable. Sherman Wealth renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or pursuant to an applicable state exemption or exclusion.

Sherman Wealth may utilize third-party websites that include social media websites, blogs and other interactive content. Sherman Wealth considers all interactions with clients, prospective clients and the general public on these sites to be advertisements under the securities regulations. As such, Sherman Wealth may retain a copy of information that Sherman Wealth or third-parties may contribute to such sites. This information is subject to review and inspection by the CCO of Sherman Wealth or the securities regulators.

Information provided on these sites is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product. Advice may only be provided by Sherman Wealth’s advisory persons after entering into an advisory agreement and provided Sherman Wealth with all requested information about your background.
If you have any questions regarding our social media policies, please Contact Us.

 

Are You Getting Charged with High Bank Fees? Here’s What To Do

The pandemic has disproportionately impacted low-earning Americans and many are paying higher bank fees for their misfortune, according to a new survey.

Those financially hurt by COVID-19 are paying checking account fees that are four times higher than unaffected households with uninterrupted employment and income, a new Bankrate survey found. YouGov interviewed 2,743 adults online from Dec. 2-4 on behalf of Bankrate.

Those who have reported having financial hardship during the pandemic said they pay monthly checking account fees of $11.41, while those who have better weathered the pandemic unscathed are paying about $2.71 per month. 

Minorities and millennials — two groups that have suffered high rates of unemployment and income loss since March 2020 — reported paying the highest bank fees.

How to avoid bank fees

Many banking institutions may waive fees or interest if you contact them to report a financial hardship. It’s always best to get in touch as soon as your income is impacted and before you incur an overdraft fee or other penalty.

It also is important to avoid poor money management. Make sure you are establishing a budget using bucket strategies, and spreading out your bill payment deadlines if you find yourself strapped with cash all at one period.  You can ask lenders about the possibility to reschedule these deadlines if necessary.You can also consider linking a checking account to a savings account that can be drawn from if you overdraft as a backstop. Avoid overdrafting your account at all costs and seek financial institutions that will work with you and match your needs. Make sure to check interest rates before opening your account in order to maximize high yield returns.  If your current accounts are hitting you with high fees, seek out help and assistance from a financial professional or institution to help you find the right place. If you have any questions, please feel free to schedule a complimentary 30-minute consultation on our site here.

Brad Sherman Named to Washingtonian’s Top Financial Advisers 2020 List

Brad Sherman has been named one of the best fee-only financial planners in the Washington, DC area by Washingtonian Magazine!

Every 1-2 years, Washingtonian Magazine publishes a list of the Washington, DC metro region’s top financial professionals.  To create the list, the editors of Washingtonian survey hundreds of individuals in the local financial services industry, asking whom they would trust with their money.  After conducting their own research, the editors finalize their list based on the professionals who receive the strongest recommendations. This year’s list is currently on newsstands in the December issue of Washingtonian.

It’s a great honor to be recognized as one of the top advisors in the region, and to be included among other highly qualified colleagues.  As fee-only fiduciaries, we remain committed to providing comprehensive financial planning and investment management for individuals, couples, businesses and non-profit services in the D.C. metropolitan area and across the country. 

To view a complete list of Washingtonian’s Best Financial Advisers 2020, check out the magazine. The online edition will be available soon.

Here’s What You Need to Know About the Updated PPP Package

The popular Paycheck Protection Program (PPP), which provides forgivable loans to small businesses to keep them afloat during the pandemic, will reopen with a few changes as the federal government attempts to better target the money to the underserved, smaller businesses that need it most. 

Below you will find some key facts from the updated stimulus package. Check here for further information and details. 

  • The PPP was re-upped by the $900 billion stimulus package President Trump signed just after Christmas. 

 

  • The Small Business Administration will restrict lending the first two days of the program, to community-based lenders like CDFIs making loans to first-time borrowers. 

 

  • That restriction follows criticism that businesses with strong banking relationships and more resources were more easily able to access money from the first round of the program than were their smaller, less-resourced peers. 

 

  • Then the program will open up to second-time borrowers that can demonstrate losses of at least 25% between 2019 and 2020 and that have 300 employees or fewer. 

 

  • The SBA said that larger lenders will be able to begin making loans under the updated program “shortly” after Wednesday, January 13, but did not specify an exact date. 

 

  • This new round of the PPP will be open through March 31, 2021.

 

  • The new stimulus bill set aside $284 billion for the current tranche of the PPP.

As we learn more about the details and regulations of this PPP package, we will share with you. Please reach out with any questions or if this new stimulus may impact you in any way. You can book a free 30-minute consultation on our site here.

Launch Financial- How To Work Through Money Conversations With Your Significant Other, with David Pearl

Brad Sherman and Ashley Perlmutter are joined by David Pearl, LCSW a psychotherapist and consultant who specializes in treating professionals, couples, performing artists and athletes. Together we will explore tips and advice on the money conversations you should be having with your significant other and when entering a new relationship. When two people with different backgrounds, risk tolerances, and views on money begin to merge their lives, things can get messy. David will walk us through how to make those situations lighter and easier on your relationships.

A little about David, he aims to provide a safe and supportive environment to strengthen self-esteem and facilitate more meaningful connections with family, friends, professional colleagues, or teammates.

David obtained his Master’s degree from The Silver School of Social Work at NYU and his Bachelor’s degree in Human Development and Family Studies from the University of Wisconsin-Madison. He is formally trained in Acceptance & Commitment Therapy (ACT), and has certifications in Imago Relationship Therapy and Prepare/Enrich Premarital and Marital Counseling. David is dual licensed in New York and Tennessee, and works with clients on an ongoing basis in both locations.

Prior to founding Music City Psych in Nashville, TN, David provided psychotherapy and performance coaching at Union Square Practice in NYC, counseling to individuals, couples, and families struggling with hematologic cancers at Mount Sinai Hospital, as well as psychodynamically oriented individual and couples counseling at The National Institute for the Psychotherapies (NIP).

Check out this episode!

Avoid These Mistakes when Rolling Over a 401(k) to an IRA

As we kick off 2021 and you begin thinking about money moves you want to make this year, we want to provide you with some insights on a common rollover and some costly mistakes associated with it. 

A good place to start is by distinguishing the difference between 401k plans and IRAs. You may be subject to penalties and taxation if you break any of the rules associated with a rollover, so it’s important to do your research first or consult with a financial professional. Both types of retirement accounts, 401(k)s and IRAs let you save tax-advantaged money.

Let’s discuss a few things you should look out for if you or your spouse rolls over a 401(k).

“Once you’ve decided to move your retirement money to an IRA, it’s best to avoid receiving a check made out directly to you from the 401(k) plan, even if it is sent to you,” according to a CNBC article. You do this so that there is no tax withholding that occurs. 

When conducting a rollover, make it clear that you want a direct rollover so that the process is easier for yourself and you can avoid any withholdings. With a direct rollover, funds are transferred directly from one trustee to another automatically, whereas with a indirect rollover, a check is paid directly to the participant, less a 20% with holding, along with a time window to get it transferred. 

Always remember to keep the rule of 55 in mind. Well what is the rule of 55 you may ask? The rule of 55 is an IRS guideline that allows you to avoid paying the 10% early withdrawal penalty on 401(k) and 403(b) retirement accounts if you leave your job during or after the calendar year you turn 55.

If your significant other is rolling over their 401(K) to an IRA, you could lose the right to be the heir of those funds. Once the money moves into rollover IRA, that account owner has the right to name any beneficiary they want without your consent. Things also tend to get tricky when a divorce occurs, so make sure to consult with your financial professional before making any financial moves or assuming any money. 

When rolling over money to an IRA, there are many steps and factors to think about and things can certainly get complicated. It may be best to consider seeking the guidance of a financial professional. If you find yourself in this situation, we would be happy to help and walk you through your rollover. To inquire more, schedule a free 30-minute consultation on our site.