by Yoni Lipski on June 10th, 2015

​The Pending Home Sales Index has reached its highest level since May of 2006. Abbreviated as PHSI, this index was created in 2001 to track the number of contracts out in the market for the sale of existing homes (single-family, condos, and co-ops). It usually takes 1-2 months to complete the sale of a home after a contract is signed – because most homes are sold after this agreement, the PHSI is a pretty accurate indicator of future homes sales, especially in the short-term. 
​The chart above shows the YOY (year over year) change in the index for the last 12 months. Pending home sales increased 14% compared to April of 2014, indicating a strong increase in these sales contracts. This upward trend shows a rising demand for homes and may indicate our economy has become stronger. Perhaps consumers feel more confident, feeling that they can handle the mortgage payments and myriad of expenses that come with the purchase and maintenance of a home. This conclusion supports most analysts’ assertion that the Fed will soon raise interest rates, as this can often be a sign of a healthy economy.
One thing’s for sure: this is a sellers market. This increase in demand means there are more people actively searching for homes to buy, driving home prices upward and often forcing consumers to enter into bidding wars. 

by Emily Matthews on May 5th, 2015

​Greetings from Austin

​Austin is considered to be one of America’s fastest growing cities. Its central location in Texas along with a wide variety of employers is well known. The great food, live music, SXSW, ACL, hiking and bike trails and the state capitol don’t hurt either.

This increase in the demand to live in Austin has caused the population to nearly double for the past twenty years, as shown in the image below.  
Approximately net 110 people move to Austin every day. Although this population growth is great for the economy, as demand for homes increase, prices increase. Anyone who looks around knows there are tons of projects going up to try and keep up with this demand, but we've got a long way to go. What does this all mean for the Austin housing market?

Austin Housing Market

The housing market has responded to this population boom by building more multi-unit living spaces rather than single family dwellings. Austin newcomers seem to be more inclined to rent instead of purchase until they get a feel for the city. All of this growth has lead to big increases in home prices almost every year. In the chart below, the red line is the average price of a home and the blue columns represents home sales year. Home prices have been increasing but it seems that total sales have plateaued a bit. 
A lack of lots for developers is leading to not enough units in central Austin. As land becomes more and more limited, buildings will tend to go higher and higher.  Austin has an expected economic growth of 6.1%. This far outpaces the country as a whole which will lead to the demand for more labor which equals more people which means more demand for housing. 

The gap between prices and area incomes is becoming a great concern. Incomes do not seem to be rising as fast as housing costs. Many potential buyers remain in rental homes or apartments. Supply and demand factors, increasing incomes, or out of towners can help continued valuation growth.

Good Time to Invest?

The booming population and lack of sufficient housing and affordable units within a 3-5 mile radius of the city center seem foreshadow a continued strong rental market. For investors, this could equal a lot of opportunities.

Talk to your financial professionals to see what makes the most sense for your individual situations.



by Emily Matthews on May 1st, 2015

​Are you financially prepared for Retirement?

​Many people have plans of retiring later than they actually do. Because of this, they are unprepared financially retirement
Around 28% of workers have less than $1,000 in savings and investments to use for retirement. And 57% have less than $25,000 saved, according to a study by Employee Benefit Research Institute.
Many people plan to work much later in their life than anticipated. In the study, 50% of employees left the workforce earlier than they had planned. 60% of these let due to health problems, and 27% of these left due to company downsizing or closure.
Shockingly, 67% of employees plan to work during their retirement years. JackDerhei, Employee Benefit Research Institute’s research director claims that “People keep saying, ‘I’m not saving so I’ll plan on retiring much later,’ but often times for reasons they can’t control, people are not able to retire as late as they want.” The bar graph depicted below, displays the averages for expected years to retire. Since 1991, the average age expected to retire has increased, with the highest average being 70 years or older. 
​While the bar chart below exhibits that the average age that people actually retire is much lower than what they anticipated. 
​It’s risky to assume that you’re going to procrastinate on saving for retirement. You never know when an event or circumstance may cause you to stop working earlier than expected, so it is important to start saving earlier rather than later.
The earlier you start on saving for retirement, the better. It is important to understand how to do the correct calculations to see if you are on track. Here at Pioneer Wealth Management, we serve as your financial fiduciary, and are more than willing to guide you through your retirement plans. 

by Yoni Lipski on April 23rd, 2015

​The last 8 months have seen an overall increase in the value of the US dollar, which has risen almost 25% in value. A strong dollar has many implications on our investments and the future course of our economy. Outlined here are some of these implications:
Foreign Investor Dollars
Foreign economies have taken a hit recently, leading investors from around the globe to park their investments in the US. Some of the main drivers for this are the strong economic growth that the US has experienced recently, as well as the upcoming, imminent rise of interest rates by the Fed.  Foreign economies have been experiencing very little growth, with some countries even seeing negative growth. In contrast, the US economy is projected to grow at a rate of 3.6% this year, allowing foreign investors to expect higher returns and feel confident in investing their money here.
U.S. Stocks
Historically, U.S. equity markets have performed well in the rise of the US dollar. It’s important to note, however, that individual sectors perform differently during these economic times. Multinational companies carry out a lot of business in foreign countries, making them susceptible to changing economic times. Currently, US companies that see most of their revenue come in from exporting are taking a hit as they exchange foreign currencies back into US dollars. When the dollar strengthens, our exports become more expensive. Since close to half of S&P 500 revenues come from outside the U.S., there’s enough reason to worry about a strong US dollar diminishing revenues simply due to foreign exchange rates.
The last column of this chart tells the S&P 500 earnings per share growth in the year following an increase of at least 10% in the value of the US dollar. This data ranges from a decrease of 9% to an increase of almost 30%, proving that there are numerous factors to market performance and returns – a strong US dollar neither guarantees nor predicts the performance of our equity markets, but it can still be used as one of the leading factors for increased returns. The second column shows that the S&P 500 has seen some sort of increase every single year after the dollar appreciated at least 10%, but we should still note that this growth is also driven by other factors.
Most commodities are priced in dollars, forcing their performance to vary depending on the value of the dollar. The chart below shows the price of oil v the US dollar. You will notice the price of oil will always decrease when the value of the dollar increases. Since the value of oil doesn't change, it wouldn't make sense for the price of oil to stay the same if the value of the dollar increases.

Additionally, a rising dollar causes commodities to become more expensive for foreign investors, therefore there may be a decrease in overall demand for them as an asset class and leading to their under-performance.
The second chart below shows a relatively strong correlation between the value of the US dollar and a broad commodity price index: as the dollar rises, commodity prices decrease due to a waning demand in the global market for commodities.
Bond Markets
When calculating real bond returns, it’s important to take inflation and the value of the bond’s currency into account. As the dollar appreciates, the real return of US bonds increases, making US bonds more popular to international and domestic investors alike. Furthermore, it makes US bonds more attractive in comparison to emerging market bonds, whose currencies are more likely to fluctuate in value and therefore increase the risk of holding those bonds. However, a properly diversified portfolio should still contain some exposure to emerging markets.
Bottom Line

The fluctuation in the US Dollar is one of many factors that can affect your investment performance and therefore cause a need to review your investment mix. Talk to your financial professionals about how this may affect your portfolio.

by Yoni Lipski on February 27th, 2015

​Five years ago, same-sex marriage was legal in 5 states. Today, over 35 states have legalized the union between same-sex couples. Unfortunately, however, many state and federal laws have not been updated to reflect this momentous change, creating a myriad of legal and financial issues for same-sex couples.
Today, there are 250,000 married same-sex couples in the United States.  A large portion of them, however, face financial and legal issues due to the legal status of their union.  It’s important to anticipate these issues and prepare accordingly in order to avoid financial and legal distress. 


Some of the most common issues arise when a same-sex couple travels to another state to tie the knot.  The federal government acknowledges same-sex marriage for income tax purposes, but each state has its own jurisdiction over the legality and administration of it.  A couple that marries in California, for example, may face these issues when they move back to Texas:
  • If one of them passes away, the other partner cannot claim Social Security benefits, as the definition of marriage falls on individual states who are responsible for administering the benefits
  • The unlimited marital deduction does not apply, creating an unnecessary tax burden in the transfer of assets between spouses
  • Custody agreements favor the biological parent despite the child(ren) growing up with a second (same-sex) parent 
And if they want to own property under both names, a whole world of legal headaches is introduced.
What You Need to Know
The legal landscape of same-sex marriage is constantly changing, and Pioneer Wealth is continuously investigating your options. Some of the questions you should ask yourself are:
  • To whom do these assets legally belong?
  • Is marriage an astute decision in the current state of things?
  • How can we prepare for retirement?
  • In a divorce, who gets to keep what?
  • What happens if my partner passes away? 
Pioneer Wealth strives to focus on the financial needs of our clients. It is critical to know all of the issues that can affect your situation and plan accordingly.

by Milad Taghehchian, CFP(R) on November 6th, 2014

The end of the year is around the corner and along with holidays, great food, and seeing family and friends,  you should be thinking about some financial homework. Here is a list of stuff we think you should be reviewing every November and December.


Tax Checklist

The last couple months of the year are a great time to begin gathering some tax information. 
  • Your 1099s for income, 1098s for deductable expenses, W2s etc will be heading your way in late January to Early February. Keep an eye out for them.
  • Begin putting together reciepts on charitable deductions, energy efficient improvements, home or rental property expenses and any other deductible expenses.

Flex Spending Accounts

Don't forget that if you have balances left in your flex spending/dependent care accounts the balance may disappear at the end of the year if not used. So this will be one of the few times you hear a wealth advisor say this, but SPEND IT ALL before the end of the year if you are going to lose it.

Tax Harvesting of Investments

If you need to have your investments rebalanced to account for all of the growth US equities have had over the last few years, look into your gains and lossess in detail. What you want to do is take losses to offset against gains in the process of rebalancing. 

Be aware of wash sale rules if you are doing this kind of movement and as always talk to your tax and financial folks if you have any questions.

If Retired

  • Review Expenses: The end of the year is a great time to review your basic expenses for the coming year. In retirement it is really important to have a good spending plan for the next year or two. If there is a big vacation, a special event or purchase, a new car, or anything of the like, lets plan for it. 
  • Review Income Sources: The 4th quarter is when pensions, social security, and annuities give you their revisions for the coming year. For example this year, we know social security will be increasing a bit for most folks. Check with your providers to see if they are giving any boosts to income in the coming year.
  • Review Distributions From Retirement Plans: Based on the 2 items above you may find it necessary to revise how much and where distributions are coming from. Additionally, if you are near age 70 1/2, it is time to begin thinking about required minimum distributions from retirement accounts. Planning now is important to help maintain correct distributions in the coming year.


  • Charitable: If you plan on gifting to charity, there are important tax considerations to be thought through. You should talk to your tax advisors about the value of making those gifts prior to year end versus waiting until the coming year. 
  • Family: For 2014 any one person can make a gift of $14,000 to any other person with no tax consequences. If gifting is part of your estate transfer plans or otherwise, this is a good time to review how much you want to gift and where you are relative to that $14,000 number for the current tax year.

Review Savings Goals

Review how you did relative to your savings goals for the current year. The end to the year is also a great opportunity to prepare your plans for the coming year. Did you get a bonus or a raise? Did you buy a new house or do you want to soon? Did you grow your family? Did you go through a divorce or other life changing event. All of these things require revisions of your savings goals and plans. 
Don't put off financial homework. Out of sight, out of mind only adds stress when referring to financial homework. Face the tasks head on, knock them out, and enjoy your holidays without worry of financial unknowns.

by Chris Cyndecki on June 23rd, 2014

World Cup fever is upon us.

TheScore recently reported the market value of each national team by summing the estimated transfer fees of each player on the team’s roster.  The estimated transfer fee represents the amount of money a club would have to pay to acquire a specific player from another club (get him out of his current club contract).

Argentinean forward Lionel Messi, arguably the best player in the world, has the highest estimated transfer fee of approximately $163,000,000. Portuguese forward Cristiano Ronaldo commands the second highest transfer fee of approximately $136,000,000.

The team with the highest valuation, according to the sum of transfer fees metric, is Brazil with a total valuation of $718,299,900. Spain has the second highest valuation of $673,567,074. Honduras has the lowest market value in the tournament of $45,053,928. The valuation disparity between the “richest” team and “poorest” team is significant, with Brazil’s market value being almost 16 times greater than that of Honduras.

Similarities can be drawn between financial markets and the club transfer markets in soccer. A company’s market value is roughly determined by its fundamentals and future growth prospects.  Similarly, a player’s transfer fee is determined by his fundamental skill and his ability to generate future revenue for the acquiring team (merchandise sales, ticket sales, network contracts, etc).

For the complete valuation list visit theScore's article.  

by Chris Cyndecki on April 25th, 2014

In the investment world, many practitioners quantify investment risk using measures of volatility. The unit typically used is standard deviation, represented as Greek letter sigma: σ.  

What is standard deviation?

Standard deviation is a measure of dispersion around a mean (average value), calculated as the square root of variance. The easiest way to explain the concept is through an illustration and an example. The bell curve below portrays the probabilities representing observed outcomes 1 and 2 standard deviations from the mean.  
For example: asset class XYZ had a 10-year average historical return of 7% and a standard deviation (σ) of 5%. This means that about 68.2% of the time, XYZ’s return fell between 2% and 12% (7%±5%) and about 95.4% of the time, XYZ’s return fell between -3% and 17% (7%±5%*2) over that sample period.

The higher the σ, the higher the risk (as defined by volatility). An asset class with a historical σ of 10% should have less predictable returns than an asset class with a historical σ of 3%.  

Standard Deviation of Asset Classes

Using monthly data from 1978 to 2003, Morningstar has created a chart of 14 asset classes, listing their respective arithmetic returns and standard deviations over the period. 


By combining asset that behave dissimilarly into a portfolio, diversification benefits can be achieved; the standard deviation of a portfolio (risk as defined by volatility) can be reduced by combining asset classes that are less than perfectly correlated. Harry Markowitz won the Nobel Prize in 1952 for his work related to these concepts.

What does this mean for your portfolio? By combining assets classes in certain proportions within a portfolio, one can achieve maximum diversification benefits (minimize risk as defined by volatility) for a given level of expected return. This is known as the efficient frontier.


Creating the optimal asset allocation involves many factors including: taking advantage of diversification benefits, analyzing current economic conditions, and evaluating the subject’s: investment goals, risk tolerance, investment experience, time horizons, cash flow, and constraints.  This is where a financial planning and portfolio management team can assist. 

by Ian Tennant, RP® on April 22nd, 2014

It's April 21st, 2014, and tax preparation professionals everywhere are breathing a sigh of relief as the data-intensive, document-laden official tax filing season has come and gone. Whew!
We've crunched the numbers, sifted through countless W-2's, 1099's, P&L's, receipts, and have once again been reminded of our appreciation for organization and great software.

It's been a fresh year for tax law, with a few of the American Taxpayer Relief Act of 2012 tax breaks expiring (e.g. Pease limitation on itemized deductions, Personal Exemption Phaseout), and the addition of a few new provisions.

Many have had the opportunity (whether desired or not) to see these new tax provisions in action, such as the Additional Medicare Tax and Net Investment Income Tax affecting higher income earners for 2013 (Single: modified AGI $200,000+, Married Filing Jointly: modified AGI $250,000+.)

We've also seen the first year that the IRS has acknowledged same-sex marriages for federal tax filing purposes (if the marriage was registered in a state that has legalized same-sex marriage, regardless of domicility.)

With all the change abound, though, one classic misconception (tax myth, if you will), has proven its innate survival instinct for yet another year: The Marginal Income Tax Bracket Misconception. Many folks still believe that if they're in the 28% marginal income tax bracket, that they're paying a flat 28% tax on their total income. The truth is, they're only paying that 28% tax rate on the top portion of their taxable income -- they're paying 10% on the first portion, 15% on the next bit, 25% on the next, then the 28% on the last bit. Marginal tax bracket means that any additional income earned within the bracket's range will be taxed at the bracket's rate, as the table below illustrates.

true representation of a person's tax liability is their effective income tax rate. The effective income tax rate is calculated by taking the sum of the tax due for all marginal income tax brackets and dividing it by a taxpayer's taxable income.

For example:

John Smith, a single taxpayer, earns total wages of $105,000 reported to him on his W-2 for 2014. Assuming this is John's only income, he'll take the 2014 standard deduction of $6,200 and a personal exemption of $3,950 to compute his taxable income of $94,850. Using the table above, that taxable income puts John in the 28% marginal tax bracket. However, we can calculate his effective tax rate by determining the amount of tax he pays in each bracket:

Tax Bracket                   Tax Due                  
       10%                   .10*9,075 = $907.50
       15%                   .15*(36,900-9,075) = $4,173.75
       25%                   .25*(89,350-36,900) = $13,112.50
       28%                   .28*(94,850-89,350) = $1,540.00
                               Total Tax Liability = $19,733.75
                               Effective Tax Rate =
(19,733.75/94,850.00) = 20.8%

As the math shows, John's effective tax rate is 20.8%. This is the average tax rate he pays on his taxable income, through those several marginal tax brackets. He actually pays the most tax in the 25% bracket, as the majority of his taxable income falls within that bracket.

This simple exercise can help illustrate the true effect of common tax strategies, deductions, and credits available to taxpayers, such as the student loan interest deduction and IRA contribution deduction. It's important to know if you qualify for these different deductions and credits, and how they can affect your personal tax situation. Always consult your trusted tax professional and financial advisor when navigating these types of scenarios.

by Chris Cyndecki on April 21st, 2014

Emerging markets have become an increasingly popular topic in financial publications and other media.
What are emerging markets?
Definitions vary, however the term “emerging markets” generally represents countries whose economies are expanding rapidly (usually measured by GDP growth). Emerging markets are on the path to becoming “developed markets” as evidenced by increasing liquidity in financial markets. Countries include: Brazil, Russia, India, China, South Korea, and Indonesia.

According to Modern Portfolio Theory, diversification benefits are enhanced as correlation between inputs decreases; combining asset classes that behave dissimilarly may reduce the volatility of the overall portfolio. Compared to other equity asset classes, emerging market stocks have one of the lowest correlations to large US companies.

Emerging economies experience faster GDP growth than mature economies due to increased industrialization and technological advancement. Because risks are numerous and substantive (see below), emerging markets exhibit higher average returns.

Emerging market companies face several substantial risks compared to developed market companies. Potential risks include: political instability, corruption, market inefficiencies, lack of regulatory oversight, and illiquidity. As a result, emerging market stocks exhibit significant volatility compared with other equity asset classes.

Should I invest?
Whether you should invest in emerging markets depends on your overall investment goals. Emerging market equities may be an attractive addition to a well-diversified portfolio of core holdings. Investment in emerging markets is becoming increasingly accessible through various mutual funds and exchange traded funds (ETFs). Talk to your financial planner about potentially including emerging markets in your portfolio.

by Milad Taghehchian CFP(R) on April 15th, 2014

If you are going through a separation or divorce things can get stressful and hectic. We aim to clear up tax filing situations here to help relieve a small portion of that stress.

How you file really depends on your status at the end of the year so lets go through some examples.

1) Divorce finalized before the end of the tax year.  
You are eligible to file as a Single person. If you have a qualifying dependent you may be able to file as Head of Household. 

2) Couples who are in the process of getting divorced at the end of the tax year.
You are still considered legally married. You may choose to file married filing jointly or married filing separately.  If you did not live with your spouse for at least the last 6 months of the tax year and you have a qualifying dependent, you may be able to file as head of household.

3) If you are legally separated under a separate maintenance decree or a decree of legal separation.
You can file as single. If you have a qualifying dependent you can file head of household.

4) If marriage was annulled
You are considered legally unmarried and can file as single or head of household if you have qualifying dependents.

As always, please consult your attorneys and tax advisors for more detailed information pertaining to your particular situation.  

by Chris Cyndecki on March 20th, 2014

Standard Achievement Test (SAT) preparation classes can be expensive.  Preparing a high school student for the college entrance exam can cost upwards of $2000 for classes and tutoring sessions.

Khan Academy, the free online video learning platform, has partnered with the College Board to create free SAT test prep software. The program will be designed to diagnose the weaknesses of the student and create a systematic approach to improving scores.

Many self-motivated students in underprivileged school districts lack the resources necessary to prepare for the exam. Khan Academy founder Sal Khan believes that access to college should be based on merit, not money. He hopes the free software will be implemented in after-school programs. 

For more information visit

by Chris Cyndecki on February 28th, 2014

When you apply for credit (e.g. auto loan, mortgage) , the lender will look at your FICO® credit score to evaluate your credit risk. This score ranges from 300-850 and is based on inputs from your credit report. Having a high credit score allows you to obtain credit at lower interest rates.
Here are the general factors which constitute the average credit score. along with each factor's percentage impact. Factor weights will vary from person to person; the best way to figure out which factor is affecting your credit score the most is by reviewing your credit report​.

Payment History (35%)
Lenders want to know if you’ve made previous payments on time. This is one of the most important factors in determining your credit score.  Your score considers: how late you were on a payment, how much was owed, how recent the delinquency is, and total delinquencies. Negative factors also include bankruptcies, foreclosures, lawsuits, and judgments.

Amounts Owed (30%)
Lenders will look at your credit utilization ratio: (total outstanding balances on all credit cards/ total credit card limits). For example: if you have one card with a $2000 outstanding balance and a second card with a $1000 outstanding balance, and your total credit limit between the two cards is $10,000, your credit utilization ratio is 30% ($3000/$10,000).

Data suggests that there is a strong negative correlation between a person’s utilization ratio and their credit score (the higher your ratio, the lower your credit score). People with the highest credit scores usually have a credit utilization ratio between 1%-10%. Having a score of 0% is not a positive factor; it usually means you are not using credit and building a credit history.

Caution: Even if you pay off your credit cards in full each month, the balances on your monthly statements are reflected in your utilization ratio. If you are using a high percentage of your credit limit each month, this can have a negative effect on your utilization ratio.

Length of Credit History (15%)
Your score takes into account the length of your credit history. A longer credit history will generally increase your credit score.

Types of Credit in Use (10%)
Your score incorporates what types of credit accounts you have. These include revolving credit accounts (e.g. credit cards) and installment/amortizing accounts (e.g. auto/home loan). Having both types of accounts with a timely payment history will help your score.  

New Credit (10%)
Data suggests that opening several credit accounts within a short period of time can have a negative effect on your score. Checking your credit report, however, will not lower your credit score.
Additional Information:

by Chris Cyndecki on February 4th, 2014

President Obama recently signed a presidential memorandum directing the Department of the Treasury to create a new type of retirement account called the “myRA.” 

The myRA account is designed as an introductory savings vehicle for individuals who don’t have access to employer-sponsored retirement plans. If you choose to participate, your employer will deduct contributions from your paycheck. Also, account owners will not have to pay any fees.

Investment Option

The myRA will have only one investment option – a variable interest-rate United States Treasury bond pool. Investors should expect returns similar to those of the Thrift Savings Plan Fund (TSP) for federal employees. The annual return for the TSP fund in 2012 was 1.47%, and the average annual return between 2003 and 2013 was 3.61%.

Tax Structure

Accounts will be structured similar to Roth IRAs. Individuals contribute after-tax money (after paying income taxes), while investment gains and withdrawals are tax-free in retirement. Principal contributions can be taken out at any time without tax consequences. To withdraw earnings, the individual must be over 59 ½ years old and must have made the initial contribution at least 5 years prior to withdrawal (otherwise 10% early withdrawal penalty + income taxes).


  • $25 minimum initial investment
  • $5 minimum payroll deduction
  • Maximum annual income limitation: $129,000 for singles; $191,000 for couples
  • Maximum contribution of $5,500 per year (or $6,500 if over age 50) in combination with IRAs and Roth IRAs
  • Once the balance reaches $15,000 or has been open for 30 years, the participant will have to roll the account over to a private sector Roth IRA.

by Chris Cyndecki on January 30th, 2014

If your 2013 Adjusted Gross Income (AGI) falls below $58,000, you can prepare your federal tax returns online for free. The IRS Free File site lists 14 commercial tax software companies that make their tax software available at no cost. Each company has its own criteria for eligibility, so be sure you’re eligible before you begin. Click here to go to the IRS Free File site and view participating companies. 

The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs also provide free in-person tax preparation for those who qualify. Click here to find a VITA or TCE site near you.

by Chris Cyndecki on January 27th, 2014

If you own a credit card, then you probably have a fundamental understanding of how compound interest can work against you. The power of compound interest can work in your favor if you have the capacity to save money early in your career.  

The chart below shows the difference between starting to save $2000 per year at age 20 versus starting at age 30 (8% rate of return and end-of-year contribution assumptions).
If you had started saving at age 20, your total assets would be $980,264.33 at age 67. If you had started saving at age 30, your total assets at 67 would equal $440,631.89 (The projection is sensitive to the 8% rate of return assumption, and the discrepancy decreases at lower rates of return).

Taxes and investment costs may have a considerable impact on long term asset growth. Investing within a tax-deferred 401(k) or IRA may make sense. Consult with your financial planner to figure out the best tax and investment strategies for your situation. 

by Ian Tennant, RP® on January 23rd, 2014

Mortgages come in all shapes and sizes, or rather: a variety of amounts, term lengths, interest rate structures, and loan-to-value ratios. While many are familiar with mortgages on a fairly basic level (typically the 30-year fixed conforming mortgage), the mortgage world is expansive and many times confusing to the everyday borrower. Some would argue that's by design to serve the better interests (no pun intended) of the lenders, but fortunately there are a plethora of online resources available to help navigate this unfamiliar territory. One of these resources,, is an excellent personal finance encyclopedia serving as the springboard of this particular blog post.

Getting to the headline here, one of the more commonly heard (yet also commonly misunderstood) components of the mortgage world are points. One of the contributing factors to misconceptions is the fact that 'points' have several different connotations in the realm of finance, as the above link reaffirms. In our example here, we're referring to mortgage origination points and discount points. In both cases below, each point is equal to 1% of the total amount being financed.

Origination points are essentially fees that the lender will charge to compensate the loan officers for their roles in the process of putting the loan together for the borrower.

[Ex:  If you have a $200,000 loan and have to pay two origination points at closing, the total fee is $4,000, which is simply 2% of the loan value.]

Discount points are a form of prepaid interest, which allow you as the borrower to 'buy down' your interest rate on the loan. The purchase of each point (1% of the loan value) generally will lower the interest rate on the loan by 0.25%. Lenders will typically allow the borrow to pay somewhere between zero to three discount points.

[Ex:  You have a $200,000 loan @ 3.75% with no points. Your lender allows you to pay up to 2 1/2 discount points, which you decide to accept. Your cost is $5,000, which gives you a $200,000 loan @ 3.125%. By paying 2.5% of the loan value in points upfront, you've bought yourself 0.625% less on the interest rate.]

**It's important to understand that many lenders that advertise rates will show rates that are based on the purchase of points, whether or not they make that clearly evident. Always be sure to get the details on a loan offer before jumping in headfirst.**

So What's The Point?

  • Generally, points paid on a mortgage are deductible for tax purposes if they meet certain IRS criteria and if you itemize deductions (on Schedule A.) Since the points are considered prepaid interest, you generally are required to deduct them along the same terms as the loan, but specific exemptions can apply that will allow you to deduct them all in the tax year they were paid. See IRS Publication 530 for further clarification on the criteria and exemptions related to the tax deductibility of points.

    When weighing whether or not to pay points, the three factors that play a role are usually:
  1. Will the points paid be eligible for tax deductibility?
    If they meet the IRS criteria in Pub. 530 , then the tax benefit could be helpful dependent on your marginal income tax bracket. A $1,000 deduction would equate to $280 in tax savings for the 28% bracket, but only $150 for the 15% bracket.

  2. How long will you live in the house?
    You can calculate a simple breakeven point for when your monthly payment savings equals your upfront cost. For instance, if you paid $4,000 in points and reduced your monthly payment by $75, you would have to live in the house for almost 4.5 years to recoup your initial cost. Paying points typically makes more sense if you plan on living in the house beyond the breakeven point. (This doesn't factor in the possible tax deduction or growth on the monthly savings if they were invested, so there's a potentially shorter breakeven point if  you run more complex projections.)

  3. Do you have the available cash to pay points?
    For most people, a down payment on a house is a hefty sum to part ways with in the first place (e.g. 20% down on a conventional loan for a $200,000 house =  $40,000.) The idea of paying more cash upfront to have a lower monthly payment might seem like a great prospect on paper, but potentially an uncomfortable or unwise decision depending on the rest of the household's financial picture. It's important to remember the big picture and see if it fits within your financial plan when making shorter-term decisions.

    This is an excellent example of why it's helpful to consult with your financial planner and tax professional to be sure you're making a healthy decision! There are many factors at play here, and every situation can be different. Better to make smart decisions now so that hindsight will be that much sweeter.

by Chris Cyndecki on January 22nd, 2014

Can’t find your tax returns? The IRS has a new service which allows you to download digital copies of tax transcripts from previous years.

Before the IRS implemented the new Get Transcript service, you had to wait 5-10 business days to receive physical copies via mail. Now you can download years of transcripts immediately from the IRS website.

​Click the following link and create an account to access your transcripts:

by Milad Taghehchian, CFP(R) on January 21st, 2014

We often meet folks who think they have a well diversified portfolio, but their thoughts on the meaning of diversified are not accurate. Here is a couple of the most common mistakes we see followed by what we really want to see.
1. I have diversification because I own 20 Blue Chip stocks.
What this tells us is that you own 20 Large US Company stocks. If the US economy is headed into a recession there is a very high probability that all of these will move downward at the same time. While you are spreading your risk to 20 companies you will still end up doing what Large US Companies do.
-Not Well Diversified
2. I'm diversified since I have 5 different US stock mutual funds.
The first thing we notice here is that you have 5 funds that invest in US Stocks only. Immediately we have 3 concerns. First, you are investing in all US companies. US Companies will generaly follow the same ups and downs as the US economy and therefore the probability of everything you own losing money at the same time is very high. The second issue is that you are invested in just stocks. You really want other assets such as commodities, bonds, or real estate. Our third red flag is that you are invested in a bunch of mutual funds. Mutual funds are an investment vehicle that can be used to sell high fee commission filled products to consumers. We will want to take a look at the fees you are paying in these funds. Several US Stock mutual funds is not well diversified.

What we want to see.
US stocks of all sizes (Small, Medium, Large)
Non US Developed Markets stocks
Non US Emerging Market stocks
Commodities (Energy, Agriculture, Basic Metals, Livestock, Timber, Water, Precious Metals)
Real Estate (Residential, Retail, Hotels and Resorts, Hospitals and Retirement Homes, Office)
Fixed Income Investments (US Bonds, Non US Bonds, Muni Bonds, CD's, Money Market, etc)

Within each one of these categories we want at least 30-100 individual instruments (stocks, bonds etc) The 30-100 should be spread among different industries. For example within Large US company stocks you want at least 30 individual stocks, and prefereably those 30 are spread among different industries (ie. pharmaceutical, defense, consumer, technology, etc.)

As always consult with your adivsors for information more specific to your needs.

by Chris Cyndecki on January 14th, 2014

How It Works:
  • Create an account at:
  • Link your debit/credit card to your Upromise account.
    • Navigate to the “My Account” link (top right corner). On the left side, under “Build My Earnings,” select “Register My Cards.”
  • Eat at a participating restaurant and earn up to 8% cash back on your meal (including tax and tip).
    • Find a participating restaurant nearby at (Map view  tab)
  • Shop online through and earn up to 8% cash back on eligible purchases.
    • Shop at:
    • Participating stores include: Apple, BestBuy, Kohls, Staples, Target, Toys “R” Us, Walmart
  • Activate eCoupons to earn cash back on participating grocery/drug store items.
  • Invite family and friends
    • Inviting friends and family to link their credit cards will significantly add to account growth 
The cash you earn goes to your Upromise account. You have the option of funneling the cash into a 529 college savings plan (tax-free investment growth). Upromise also gives the option of requesting a check for accumulated cash.  

by Milad Taghehchian, CFP(R) on January 14th, 2014

We as human beings have done a great job of recognizing and using natural cycles to our benefit. We know that after the amazing bounty of Spring we have the lag and droughts of Summers followed by the graying and stagnation of Winter. More importantly we have learned that while some things do well in the Spring others only thrive in Winter.

These same principles should be applied to your investment portfolio. We know there is a cycle to the economy. We know when the economy is very strong people tend to rush in and push prices higher than they should. This will always lead to a crash in prices. When things are going down we tend to push them lower than their natural value. This period is identified by fear and panic selling of decent assets after which point things start to pick up again.

However, it is important to recognize that when one asset such as the US Stock Market is in its winter, another asset such as Real Estate may be in its Spring. Many try to predict asset cycles, but most fail. The way to take advantage of these natural swings is to own the asset classes that have varying cycles. You want some US Stocks, some Non-US Stocks, US Bonds, Non US Bonds, Commodities, Real Estate, Basic Materials, etc. All of these investments move in varying directions for a variety of reasons. You want to know that when your spinach is not growing, your tomatoes may be doing well.
*image courtesy of

This matrix illustrates the correlation among various asset classes. The closer the number is to +1 the more highly correlated the performances are. Near 0 means no real correlation. The closer we get to -1 the more near complete opposite performance we achieve

by Milad Taghehchian CFP(R) on July 15th, 2013

As the economy and the housing market rebounds there is a great deal of talk about the potential for increased interest rates in our near future. The bond market has already reacted to this fear which has resulted in a slight increase in most rates. What does this mean for the housing market and the economy as a whole?

One of the keys in the rebound of the housing market has been interest rates that were at historical lows. These low rates had 3 main positive effects.

1) People who have decent credit and equity in their homes have refinanced to low rates allowing them more flexibility in their monthly budgets. This extra money that was going to interest in previous years could be spent (boosting the economy) or invested (boosting market returns).

2) These low rates allowed people to buy a bit more house than they could afford at previous higher rates. For example, if you were buying a 200k house at 6% interest 4 years ago, you would pay approximately $1000 per month in interest in your first year. If you purchased that same 200k home 1 year ago at 3.5% interest you would only pay approximately $580 per month in interest in your first year. This obviously allows you to save some money or potentially buy more home for the same cost. 

3) Many people used the opportunity that lower interest rates provided to purchase investment properties. Making properties cash flow with the lower rates has been a lot easier than at higher rates.

All of this has helped increase home sales and property values over the last few years. Increasing interest rates can put a stop to all of the above. People will find buying new homes tougher in the next few years. They will find cash flowing investment properties to be a bit more of a challenge. Additionally, those who buy homes will find that their monthly cash flow is a bit more limited due to higher rates which will result in them having less discretionary income to save or spend.  The natural result here is that home sales will begin to slow down. The big question is how quickly will this slow down be and will it be significantly harmful to the economy. That question is up in the air. We will just have to wait and see. 

In the meantime if you are still looking to buy a new home, refinance a current home, or invest in real estate you may be running out of time at these rates. Consult your mortgage professionals and financial advisors to help with these decisions.

Posted on July 14th, 2013

Mortgage rates for 30-year fixed mortgages rose this week to an average of 4.52%. The 30-year fixed mortgage rate hovered between 4.45 and 4.55 percent early last week and spiked at 4.6 percent on Friday before declining near the current rate early this week.

Increased expectation that the FED will start easing federal stimulus late 2013 has bond holders selling heavily resulting in increased rates. Additionally, the 15-year fixed mortgage rate this morning was 3.52 percent, and for 5/1 ARMs, the rate was 3.69 percent.

As we arrive closer to the date when the bond purchasing program is actually reduced the rates are expected to increase even further.

Posted on July 14th, 2013

With the amount of knowledge available to the masses via our new technologies, post high school education is being revolutionized daily. Here is one great example.

Coursera hits 4 million students and triples its funding

Posted on January 24th, 2011

Teaching kids about money is as fundamental in today's world as any other valuable lesson you will be teaching them. Here are some tips from David Bach.

by Milad Taghehchian, CFP(R) on December 17th, 2010

One of the greatest feelings we have as a financial planners is when our plans come to fruition. Over the last few years, we have seen several of our clients reach the dream of seeing their kids enter and exit college. Planning for college expenses can seem like a daunting task but like any other challenge facing it dead on is much better than sweeping it under the rug. So lets face it dead on here.
  • 1. Figure out how much college will cost your kids.

The place to start is visiting the websites of some of the academic institutions you think your kids may attend and look at the anticipated costs for tuition, fees, room and board. I know trying to decide where the kid will go to college when its still hasnt learned to walk is a tough prospect, but make some generalizations.

Once you have an idea of what it may cost today. Visit some of the great calculators on the web to help you get an idea of what it may cost when your kid is ready to take his/her first college course. Here are some of the calculators we like. If they ask for the anticipated inflation rate for college expenses, make sure you set that to at least 5%

  • 2. Decide how much you want to save.

Do not feel overwhelmed after step 1. Understand that paying for college expenses involves working, loans, grants, scholarships, along with savings. Remember rule #1 is save for your own retirement first, and then for college expenses. You can obtain loans, grants, and scholarships to fund college expenses, but there are no loans to retire. After understanding your retirement savings and fully funding it, take an account of your budgets to determine what you are willing to save toward college.

  • 3. Decide where you are going to save your money.

529 plans generally are the best place to start saving money for college expenses. You invest after tax dollars into this type of account, but all your gains and interest earned will be tax free as long as they are used toward qualified education expenses.

The only negative about 529 plans is that it has to be used for education purposes or there are penalties attached. The penalties are 1) you will have to pay taxes on the gains that were previously growing tax free in the account and 2) there is a 10% IRS penalty on anything that is taken out that is not for education purposes.

There are many different places that offer 529 plan. These days it seems that every mutual fund and insurance company has some sort of plan that they offer. As with other investments, minimizing your cost is step number 1 in determining which 529 provider you will want to choose. Our favorites are listed here.

Utah Educational Savings Plan Trust
College Savings Iowa
New York's College Savings Program - Direct SoldV
Vanguard 529

  • Finally, I know the baby clothes are cute (especially those little shoes) but try to pass up on some of the fun stuff for some of the long term benefit of your kids.

Posted on December 16th, 2010

When looking for diversification in your investments you want to first determine your asset allocation (how much you want in bonds, stocks, international vs US, commodities, real estate etc). Next you need to fill the different pieces of your asset allocation pie chart with stuff.

The stuff that fills each piece of your pie chart should be baskets of investments in that category. For example, if we say you need 25% of your assets in large US companies. We really dont want you to go buy the stock of 1 large US Company. We want you to own a bunch of large US Companies. There are only 3 ways you can reall do this.

  • 1. Go out and buy a bunch of stocks in a bunch of different companies. This can be incredibly expensive and time consuming to start with not to mention you would then have to keep track of how each stock is doing to make sure you dont lose a bunch of money.

  • 2. Buy a Mutual Fund. In the past, mutual funds were the only way to get a basket of investments in one stock. You could go out and buy something like the American Funds Growth Fund of America (AGTHX). and this could satisfy the large US company portion of your portfolio. However, most mutual funds have a lot of fees. (There are some that dont. ex: Vanguard). They have loads, and initial sales charges, and deferred sales charges, and 12b-1 fees, and management fees and on and on.

  • 3. Exchange Traded Funds (ETFs). ETFs have been around for a few years now and provide for a great way to get this basket of stocks in specific categories. There are many hundreds of different ETFs that allow you to buy a category as wide as almost all US Stocks to a category as specific as just silver. The main benefit of ETFs vs. other ways to buy baskets of investments is that they are generally incredibly low cost. More often than not they have very low ongoing management fees (around 0.20% vs 1.5% in most comparable mutual funds). There is sometimes a cost associated with buying or selling the ETF but places like Charles Schwab, Fidelity, Vanguard, and TD Ameritrade are offering commision free transactions on many ETFs. Check them out as an alternative in your portfolios.

as always check with your advisors, read prospectuses, and make sure that investments fit your risk tolerance, return needs, and financial goals.

by Milad Taghehchian, CFP(R) on November 15th, 2010

The end of each year represents a great time to review your financial decisions over the closing year especially in light of the effects these decisions may have on your taxes. Heres a quick checklist to review before the close of the year.

  • Spend your flexibile savings dollars: If you have been saving into a flexible savings account for dependent care or medical purposes throughout the year, your savings may be set up to disappear at the end of the year if they are not used. Make sure you review your plan and spend the money before it goes into the black hole.

  • Required Minimum Distribution: If you are over age 70 1/2 you will have to take minimum distributions from the bulk of your retirement plans. Visit the IRS website linked for instructions.

  • Max fund your 401k, IRA, Roth IRA or other retirement accounts: With tax changes on the horizon its important to shelter as much money from taxes as possible. Take advantage of your limits if you can.

  • Take some gains and losses: The end of the year is always a good time to get rid of your investment losers. You can write off a good chunk of your capital loses or take some gains and offset them with those losses.

  • Make your charitable gifts: Make charitable contributions before the end of the year. Remember to keep bank records or receipts for all cash donations. The IRS will require a written confirmation from the charitable organization for gifts over $250. Consider making gifts of securities rather than cash. If you have a gain in a security that you donate to a charity, more often than not you will be able to take the deduction for the full amount of your contribution while not having to pay the capital gains tax for the gain in that security.

  • Plan your energy credits: If you have made or are thinking of making certain green improvements the state, the feds, the county, and the city have various tax credits. Check them all out to ensure you have the proper documentation to take advantage this free money.

  • Start gathering all your documents and receipts now: Saving your tax preparer time means you save yourself money. If you do your taxes yourself, saving yourself time will save you from massive headaches.

  • Check your witholding: If you are getting a huge refund or have to pay each and every year, than you need to do a better job of understanding your witholding from your paycheck. No one likes to be surpirsed with a huge tax bill and this is the best way to make sure that doesn't happen. If you need to change your witholdings ask your employer for the form W4. Here are some great witholding calculators to help you out.
IRS Calculator
Kiplinger Calculator

As always make sure you review any tax questions or concerns with your tax advisors.