Tax season is here, and if you’re an investor, that means there’s something that should be on your radar — 1099 forms. Whether you’ve earned interest from bonds, dividends from stocks, or capital gains from your trading activity, the IRS wants to know about it. 

But, when done strategically, tax reporting isn’t just about compliance; it’s an opportunity to optimize your investment strategy and minimize unnecessary tax burdens.

Understanding what is on a 1099 tax form and how to use it to your advantage is key to protecting your wealth. Misreporting gains, overlooking deductions, or misunderstanding tax rates could leave you paying more than you need to — or worse, trigger unwanted IRS scrutiny. 

For investors managing complex portfolios, tax planning isn’t something to think about once a year. It’s a year-round strategy that can help preserve more of your returns and keep your portfolio working efficiently.

In this article, we’ll walk through:

• The different types of 1099 forms investors receive and what they mean for your taxes.
• How to interpret your brokerage 1099 and avoid common tax pitfalls.
• Key strategies to reduce tax liability and improve portfolio efficiency.

The U.S. tax code is complicated, but navigating it doesn’t have to be. With the right knowledge, the right financial and tax advisor, and a proactive plan, you can make tax season another opportunity to strengthen your longer-term financial strategy.

What is a 1099 Tax Form?

If you’ve earned investment income in a non-retirement, “taxable” account, you may be wondering: What is a 1099, and how does it impact my tax return? 

A 1099 tax form is one of the most common documents investors receive during tax season. It’s how brokerage firms, banks, and other financial institutions report taxable income to both you and the IRS. 

Unlike a traditional W-2, which reports income from an employer, a 1099 tracks investment-related income — including dividends, interest, and capital gains — that isn’t subject to automatic withholding.

For investors, understanding what’s on a 1099 is essential. If you’ve earned interest from a high-yield savings account, received dividends from stocks, or sold assets for a gain, these transactions need to be reported correctly to avoid unnecessary tax liabilities.

Types of 1099 Forms Investors Need to Know

If you’re an investor, chances are you’ll receive at least one 1099 tax form during tax season. Depending on the types of investments you hold and the transactions you’ve made throughout the year, your brokerage firm may issue multiple forms, each reporting a different type of income. 

Investors must understand the different types of 1099 forms because not all 1099 income is taxed the same way. 

Qualified dividends, for example, may be taxed at a lower federal rate (usually 15%) than ordinary income, while short-term capital gains (from assets held less than a year) are taxed at a higher rate than long-term capital gains. Understanding these distinctions is critical to properly managing your tax liability and ensuring your investment strategy is as tax-efficient as possible.

Failing to report 1099 income accurately can lead to IRS penalties or an unexpected tax bill. Since your brokerage firm sends a copy of your 1099 to the IRS, any discrepancies could raise red flags and result in additional scrutiny.

Understanding these forms — and how they impact your tax liability — is essential for effective tax planning and portfolio efficiency.

1099-INT: Reporting Interest Income

The IRS 1099-INT form is issued when you earn more than $10 in interest income from bank accounts, bonds, or money market funds. While this may seem straightforward, the tax treatment of interest income varies depending on the source.

• Taxable Interest – Interest earned from savings accounts, corporate bonds, and certificates of deposit (CDs) is taxed as ordinary income, meaning it is subject to your highest marginal tax rate.
• Tax-Exempt Interest – Interest earned from municipal bonds is generally exempt from federal taxes and may also be exempt from state and local taxes, depending on where the bond was issued.
• U.S. Treasury Interest – Interest from Treasury bonds, bills, and notes is exempt from state and local taxes but still subject to federal taxes.

For investors who hold fixed-income securities, understanding how 1099-INT income is taxed is key to structuring a tax-efficient portfolio and preparing for tax season.

1099-DIV: Reporting Dividend Income

If you received $10 or more in dividends, your brokerage will issue a 1099-DIV form. This form reports dividends and capital gain distributions from stocks, ETFs, and mutual funds. However, not all dividends are taxed the same way.

• Qualified Dividends – These dividends are taxed at long-term capital gains rates (0%, 15%, or 20%, depending on your taxable income). To qualify for this favorable tax treatment, the stock must meet specific requirements, as determined by the IRS.
• Nonqualified Dividends – Also known as ordinary dividends, these are taxed as ordinary income, meaning they could push you into a higher tax bracket.
• Capital Gains Distributions – If you own mutual funds or ETFs, you may receive capital gains distributions, which occur when the fund manager sells securities within the fund. These are taxed based on whether they are short-term or long-term gains, even if you didn’t sell shares yourself.

For investors looking to manage their tax liability, placing dividend-generating investments in tax-advantaged accounts such as IRAs or Roth IRAs can help reduce tax exposure over time.

1099-B: Reporting Stock and Asset Sales

If you sold investments — such as stocks, bonds, mutual funds, or ETFs — you’ll receive a 1099-B from your brokerage. This form reports:

• Proceeds from sales.
• Cost basis (what you originally paid for the investment).
• Short-term vs. long-term classification.

The difference between the sale price and your cost basis determines whether you have a capital gain or loss. Short-term capital gains (held less than one year) are taxed at ordinary income rates, which can be as high as 37%, depending on your income.

On the other hand, long-term capital gains (held more than one year) are taxed at the more favorable capital gains tax rates (0%, 15%, or 20%).

Key Tax Considerations for Investors:

• Wash Sale Rules – If you sell a security at a loss and repurchase a “substantially identical” asset within 30 days, you cannot claim the loss for tax purposes. This can impact tax-loss harvesting strategies.
• Missing Cost Basis – Some brokerage firms may not provide cost basis details for older investments. If the cost basis is not included, you may be taxed on the full proceeds of a sale unless you have accurate records.

1099-MISC: Reporting Miscellaneous Investment Income

A 1099-MISC is less common for stock market investors, but may apply if you earned:

• Rental income from investment properties.
• Royalties from intellectual property or mineral rights.
• Certain alternative investment earnings.

Unlike other investment-related 1099 forms, a 1099-MISC reports miscellaneous income, such as rental earnings or royalties. Investors receiving this form should follow the IRS 1099-MISC form instructions carefully to ensure they properly report income and avoid self-employment tax surprises.

1099-R: Reporting Retirement Account Distributions

If you have taken withdrawals from a 401(k), IRA, pension, or annuity, your financial institution will issue a 1099-R to report the distribution. A 1099-R can be issued regardless of whether the distribution is taxable. For example, when you roll over retirement assets directly from a 401(k) to an IRA, you will receive a 1099-R for the rollover — even though this is not a taxable event.

• Traditional IRA and 401(k) withdrawals are taxed as ordinary income.
• Roth IRA withdrawals are tax-free, provided you meet the IRS’s eligibility requirements.
• Early withdrawals (before age 59½) may trigger a 10% penalty in addition to ordinary income taxes unless an exception applies.
• Required Minimum Distributions (RMDs) from tax-deferred accounts begin at age 73 and must be reported on your tax return.
• Direct rollovers or rollovers processed within 60 days from one qualified account to another qualified account are non-taxable events.

What is on a 1099 Tax Form? 

A brokerage 1099 tax form consolidates all taxable transactions related to your investments. While these forms may seem straightforward, overlooking key details can lead to misreporting income, overpaying taxes, or triggering IRS scrutiny.

Key Sections of a 1099 Form for Investors

• Payer and Recipient Information – Your name, address, and Social Security number should match your tax records. Errors here can lead to reporting mismatches with the IRS.
• Income Details – Different sections report interest, dividends, capital gains, and other taxable income separately.
• Federal and State Tax Withholding – If you requested tax withholding on investment income, this section will show the amount withheld.
• Cost Basis Reporting – Cost basis reporting is crucial for 1099-B forms, as cost basis helps you report gains and losses on your tax return.

Common Mistakes to Avoid

1. Missing Cost Basis Adjustments
   • Some brokers may not report cost basis for older investments, leading to inaccurate capital gains calculations if you do not maintain accurate records.
2. Overlooking Reinvested Dividends
   • Even if dividends are reinvested, they are still taxable in the year they were distributed.
3. Ignoring State Tax Implications
   • Municipal bond interest may be federal tax-exempt but taxable at the state level, depending on where the bonds were issued.

Failing to double-check 1099 details before filing your return can result in unnecessary tax liabilities or red flags for an IRS audit. It is important to work with a trusted tax professional to be sure you’re not missing any key information for your tax return.

Potential IRS Red Flags

To avoid unnecessary IRS audits and remain compliant, it’s important to remain vigilant. Common red flags for the IRS include:

• Discrepancies between your reported income and the IRS copy of your 1099.
• Failing to account for capital gains distributions from mutual funds.
• Forgetting to report small dividends or interest, which could trigger an IRS audit.

Strategies to Minimize Tax Liability on 1099 Income

Once you understand how investment income is taxed, the next step is optimizing your portfolio for tax efficiency. 

Here are key strategies investors can use to reduce their tax burden:

1. Hold Interest and Dividend-Paying Investments in Tax-Advantaged Accounts

Interest and dividends from stocks, ETFs, and mutual funds are taxable, but where you hold these investments matters in the long run.

• Qualified dividends and interest income are subject to taxes annually, but holding these assets in IRAs or 401(k)s allows the income to grow tax-deferred and go untaxed until withdrawn.
• Consider keeping high-yield bonds, REITs, actively-traded mutual funds and ETFs, and dividend-paying stocks in retirement accounts to reduce annual tax exposure.

2. Utilize Tax-Loss Harvesting

• Selling underperforming investments to offset capital gains can significantly reduce taxable income.
  • Be aware of wash sale rules, which prevent investors from claiming a loss if they repurchase the same, or a very similar, security within 30 days.

3. Time Your Asset Sales Strategically

• Holding an investment for more than one year qualifies it for lower long-term capital gains tax rates.
• Consider deferring sales into the next tax year if it helps lower your taxable income.

4. Donate Appreciated Securities Instead of Selling

• Instead of selling stocks and paying capital gains tax, donate appreciated assets to a qualified charity.
  • This allows you to deduct the full fair market value of the securities while avoiding capital gains taxes.

5. Optimize Retirement Withdrawals

• Coordinate withdrawals from taxable, tax-deferred, and Roth accounts to manage tax brackets.
• Avoid early withdrawals to prevent penalties and unnecessary taxes.
• Consider partial Roth conversions to move taxable IRA assets into tax-free accounts at lower tax rates.
• Consider Charitable Qualified Distributions for your Required Minimum Distributions to exclude otherwise taxable RMDs from taxation if donated to charity.

Final Thoughts

While reporting taxes can come with some stress, for investors, tax reporting is an opportunity to align your financial decisions with a tax-efficient investment strategy. 

The 1099 forms you receive each year provide a snapshot of your portfolio’s taxable activity, but understanding how to interpret and report them correctly is key to minimizing your tax liability and keeping more of your hard-earned returns.

Managing tax implications on investments isn’t a once-a-year task. It requires proactive planning, careful portfolio management, and a longer-term strategy. From knowing how dividends and interest income are taxed to strategically timing asset sales and utilizing tax-loss harvesting, small adjustments can make a significant impact on your overall financial picture.

This is where working with a fiduciary financial advisor can be invaluable. A well-structured financial plan doesn’t just focus on market returns, but considers tax implications, risk management, and wealth preservation strategies. 

A trusted advisor can help you:

• Ensure accurate tax reporting by reviewing your 1099 forms and spotting potential errors before you file.
• Develop a tax-efficient investment strategy that considers asset location, withdrawal timing, and portfolio rebalancing.
• Reduce capital gains tax exposure by implementing tax-loss harvesting and charitable giving strategies.
• Navigate changing tax laws to optimize your portfolio while staying compliant with IRS regulations.
• Work in tandem with your tax advisor or CPA to ensure you are receiving coordinated tax-minimization counsel.

Tax planning helps take you from reacting to what happened last year to preparing for what’s ahead. The decisions you make today can help reduce your tax burden in the future and position you for greater financial success.

At Towerpoint Wealth, we specialize in helping investors build tax-efficient portfolios that align with their long-term financial goals. If you want to ensure your investments are working as efficiently as possible — both in terms of growth and tax savings — we invite you to schedule a 20-minute “Ask Anything” conversation today. We’ll help you take a strategic approach to your investments so you can maximize returns and minimize tax surprises.

Navigating Market Volatility and Potential Tariffs in the U.S.

As Donald Trump takes his seat as the 47th President of the United States, investors are closely monitoring the potential impacts of his administration’s policies on the financial markets. Trump’s inauguration on January 20, 2025, marked the beginning of a term filled with significant priority and policy shifts, including the signing of numerous executive orders aimed at reshaping the economic landscape.

When it comes to investing, politics can be a powerful market driver. Whether it’s tax reform, trade policies, or industry (de)regulations, the decisions made in Washington often ripple through the economy and financial markets. As speculation grows about the possibility of a second Trump presidency, investors are left wondering how to navigate the potential changes ahead.

The Impact of Trump’s Policies on Markets

Donald Trump’s first term as president was marked by sweeping tax cuts, significant deregulation, and a trade war with China — policies that shaped market dynamics in both predictable and unexpected ways. While the stock market saw record highs under his leadership, periods of volatility were also common, as markets reacted to bold economic moves and controversial policies.

For investors, preparing for another Trump presidency means more than just analyzing historical market trends. It requires a forward-looking strategy that balances potential risks with opportunities. From navigating market volatility to optimizing tax strategies and adjusting portfolios to align with shifting economic priorities, proactive planning will be key.

In this article, we’ll discuss how investors can prepare for the uncertainties and opportunities of a Trump presidency. Whether you’re a seasoned investor or just beginning your financial journey, our goal is to help you build a resilient investment strategy that aligns with your longer-term goals.

Key Takeaways

• The Trump presidency is expected to bring significant policy changes, including tax reform, deregulation, and tariffs, all of which can create ripple effects across financial markets.
• Political uncertainty, trade tensions, and major policy announcements can lead to shorter-term market fluctuations, highlighting the importance of maintaining a steady hand and focusing on longer-term investment strategies.
• Industrial sector stocks, including those in manufacturing and energy, and healthcare stocks, may benefit from pro-business policies, while undervalued assets and alternative investments can offer growth and diversification opportunities during periods of volatility.
• Potential updates to corporate taxes, estate tax exemptions, and tax deductions could significantly affect portfolio returns, making tax-efficient strategies essential for investors.

Donald Trump’s Effect on the Economy and Markets

Donald Trump’s presidency will probably be remembered for bold economic policies and their sweeping influence on financial markets. As we look to the future, understanding the impact of these policies can help investors navigate potential changes and position their portfolios effectively.

Overview of Past Economic Policies

During his first term, Trump enacted many transformative economic initiatives that shaped both domestic and global markets. Some examples include:

• Tax Cuts and Jobs Act (TCJA): This landmark tax overhaul significantly reduced corporate tax rates, boosting corporate profits and stock market returns. It created a favorable environment for investors, particularly in sectors with high corporate earnings potential.
• Deregulation: Industries such as energy, financials, and manufacturing benefited from reduced regulatory burdens. This pro-business stance generally spurred economic growth, boosted domestic private investment, and contributed to investor confidence.
• Trade Wars and Tariffs: Trump’s aggressive trade policies, particularly with China, created ripples across global markets. While tariffs in the U.S. were aimed at protecting key domestic industries, they also significantly escalated the trade war. Tariffs in China targeting key industries like technology and manufacturing led to disruptions in global supply chains, and increased costs for U.S. businesses.

Key Sectors Likely to Be Impacted

A future Trump presidency could once again focus on specific sectors, creating both risks and opportunities for investors. 

Domestic stocks in sectors like manufacturing and energy may reap the benefits of pro-business policies and deregulation, potentially leading to a resurgence in job creation and investment opportunities in these industries. Deregulation and cost-cutting measures could create growth opportunities for healthcare stocks, particularly in pharmaceuticals and medical technology.

Antitrust scrutiny, on the other hand, could drive technology stocks down, creating volatility but also potential opportunities for savvy investors.

Lessons Learned from Past Market Reactions

Trump’s presidency demonstrated how closely markets react to political rhetoric and policy announcements.

• Historical Performance: The stock market experienced record highs during his first term, but it was also marked by volatility, especially during the pandemic, as well as trade disputes and geopolitical tensions.

• Investor Sentiment: Bold policy moves often triggered immediate market reactions, highlighting the importance of maintaining a steady hand and focusing on longer-term strategies instead of drastic reactions to news headlines.

By analyzing the past, investors can better anticipate potential portfolio effects and adapt their strategies to align with the economic priorities of a Trump administration. From sector-specific opportunities to broader market trends, understanding these dynamics is crucial for navigating the complexities of the investing landscape.

Preparing for Market Volatility

Political uncertainty has long been a driver of market fluctuations, and this trend is likely to continue during a second Trump presidency. Policy shifts such as new tariffs, regulatory changes, or tax reform often create ripple effects across industries and sectors. 

For example, the imposition of tariffs during Trump’s first term disrupted global supply chains, raising questions about tariffs and inflation while sparking market turbulence, affecting industries from technology to agriculture.

Markets tend to react swiftly to major policy announcements, both positively and negatively. A tweet or statement from the president regarding trade, interest rates, or fiscal policy could lead to significant short-term volatility. This further underscores the importance of maintaining a steady hand and resisting the urge to make reactive investment decisions.

Strategies to Mitigate Risk

Investors don’t have to be at the mercy of market swings. Understanding how to prepare for tariffs and other economic factors can position investors to make more empowered decisions. Proactive planning and diversification are essential tools for weathering volatility:

• Diversification Across Asset Classes and Sectors:
  Spreading investments across a mix of equities, bonds, real estate, and alternative assets helps cushion against downturns in any single sector. While it is possible that technology companies may face antitrust scrutiny, for example, energy or manufacturing sectors could benefit from deregulation under Trump’s policies.
• Defensive Investments for Stability:
  In times of heightened volatility, assets like bonds, utilities, and consumer staples provide a level of safety. These investments typically perform well in uncertain markets due to their lower risk and consistent returns. Treasury Inflation-Protected Securities (TIPS) can also be a useful hedge against inflation.
• Avoid Emotional Decisions:
  It’s easy to get caught up in market noise, especially during politically charged periods. However, research consistently shows that staying the course and focusing on longer-term goals yields better outcomes. Investors should avoid making drastic changes to their portfolios based on shorter-term political events.

Capitalizing on Opportunities

While market volatility can be unsettling, it also presents valuable opportunities for savvy investors. 

Certain industries may experience temporary setbacks due to political or economic shifts, creating attractive entry points for value investors. For example, tariffs or regulatory changes that temporarily depress stock prices can provide a chance to acquire high-quality assets at a discount. 

Beyond equities, alternative investments such as commodities, real estate investment trusts (REITs), or even gold offer diversification and protection against market turbulence. These assets are often less correlated with traditional equities, helping to stabilize a portfolio during periods of uncertainty. 

Rebalancing your portfolio in response to policy impacts can also be essential to maintaining alignment with your financial goals and risk tolerance. This proactive approach allows investors to lock in gains and strategically reinvest in areas poised for greater growth, turning market challenges into opportunities for longer-term success.

Tax Policies and Their Investment Implications

Tax policy changes are among the most impactful factors influencing investment strategies, especially under a Trump presidency. During his previous term, the Tax Cuts and Jobs Act (TCJA) lowered personal income tax rates for nearly all Americans, and lowered corporate tax rates from 35% to 21%, leading to increased corporate profitability and higher stock prices. If Trump continues to prioritize pro-business tax policies, investors may see an extension of the TCJA’s provisions, and/or further corporate tax reductions.

On the other hand, it is possible that there could be increased focus on eliminating specific deductions or credits to offset rising government spending. These adjustments could have significant implications for corporate earnings, dividend payouts, and investor returns. 

Understanding these potential changes is critical for positioning your portfolio to take full advantage of favorable tax conditions while mitigating potential downsides.

Tax-Efficient Investment Strategies

To navigate a changing tax landscape, investors may want to consider strategically incorporating tax-efficient strategies into their financial planning. Properly utilizing tax-advantaged accounts, such as IRAs and 401(k)s, can help shield your investments from immediate taxation, allowing your money to grow more effectively over time. Tax-loss harvesting is another powerful tool to offset capital gains by selling underperforming assets, which can help reduce your taxable income.

Estate Planning Considerations

Changes to estate tax exemptions could also be on the horizon. Under the current provisions of the TCJA, the federal estate tax exemption stands at $13.99 million per individual in 2025, but this amount could be reduced if the act sunsets as scheduled at the end of this year. However, at Towerpoint Wealth, we assign a relatively high probability that the TCJA will be extended this year, before it is set to expire on 12/31. 

Regardless, proactively reviewing your estate plan and considering strategies like gifting, creating trusts, or utilizing the current exemption limits can help preserve generational wealth. By working with financial and estate planning professionals, you can adapt to potential tax changes while ensuring your long-term legacy.

Positioning Your Portfolio for Economic Shifts

A well-balanced portfolio is the cornerstone of a sound investment strategy, especially during times of economic uncertainty. 

Growth-oriented investments, such as equities, can benefit from pro-business policies like deregulation and tax cuts. Industries like energy, manufacturing, and financials may see some renewed momentum under a Trump presidency, offering opportunities for investors to benefit from capital appreciation.

At the same time, stability is crucial to cushion against market downturns. Investments like bonds, cash reserves, and dividend-giving stocks can provide more predictable income and reduce overall portfolio risk. Striking the right balance between growth and stability helps to ensure your portfolio is positioned to weather economic shifts while pursuing longer-term gains.

Accounting for Inflation and Interest Rates

Inflation and interest rate trends are critical considerations when positioning your portfolio. If pro-growth policies lead to higher economic activity, inflation may rise, potentially eroding the purchasing power of your investments. Owning commodities, as well as Treasury Inflation-Protected Securities (TIPS) are an effective way to hedge against inflation, as they adjust with the Consumer Price Index (CPI) to maintain real (after-inflation) value.

Federal Reserve decisions on interest rates will play another significant role in shaping market conditions. Rising rates can impact bond prices and borrowing costs, while creating opportunities for income-focused investments. Adjusting your portfolio to account for these trends can help you maintain financial resilience in an evolving economic environment.

The Role of Global Investments

Increased trade tensions and tariffs could prompt volatility in global markets, but they may also open doors for investors willing to look beyond U.S. borders. International equities and bonds offer diversification and can serve as a hedge against U.S.-specific risks. 

Emerging markets with growing economies may present attractive growth opportunities, while developed markets can provide stability and steady returns. By diversifying globally, you reduce your reliance on the performance of the U.S. economy, ensuring that your portfolio remains resilient in the face of domestic economic challenges.

Working With a Financial Advisor to Navigate Political Transitions

Navigating the complexities of a Trump presidency requires more than just understanding the headlines — it demands a deep knowledge of tax laws, market dynamics, and regulatory changes. A seasoned financial advisor can help you interpret how these factors affect your portfolio, and develop strategies tailored to your unique personal and financial goals and risk tolerance.

Financial markets are inherently dynamic, and political transitions only add to this complexity. A proactive advisor will work with you to regularly review and rebalance your portfolio, ensuring that it aligns with evolving economic conditions and your personal objectives. They can also help you anticipate and adapt to regulatory changes, keeping your investments on track despite shifting market conditions.

Perhaps the greatest benefit of working with a fiduciary financial advisor is the peace of mind it provides. By delegating the complexities of financial planning and investment management to an expert, you can focus on your longer-term goals while enjoying the benefits of a well-crafted strategy.

Final Thoughts

The relationship between politics and investing is complex, especially under a Trump presidency, where policies can create both opportunities and challenges for investors. By understanding the potential impacts of economic shifts, tax changes, and market volatility, you can position your portfolio to thrive in a dynamic environment.

At Towerpoint Wealth, we specialize in helping clients navigate these uncertainties with tailored investment strategies that balance growth, stability, and tax efficiency. Whether you’re preparing for market fluctuations, optimizing your retirement plan, or exploring global diversification, our team is here to guide you every step of the way.If you’re ready to build a resilient financial plan that aligns with your unique goals and priorities, we invite you to schedule a 20-minute “Ask Anything” conversation today. Together, we’ll help you navigate the complexities of investing in this new presidency and beyond.

How Retirement Income Planning for Retirement Can Give You the Confidence to Spend

After dedicating a good portion of your life to earning and saving, the idea of spending in retirement can feel like you’re doing something wrong and depleting your savings.

According to Retirable.com, only 41% of near-retirees are confident in their month-to-month spending in their current state and moving into retirement! It’s not uncommon for retirees to wonder, “Am I doing enough to make my savings last?” or “How much can I spend in retirement?” While these feelings are natural, they often create hesitation and prevent retirees from fully enjoying the financial freedom they’ve worked so hard to achieve.

The reality is that transitioning from saving to spending is more than just a financial adjustment — it’s an emotional one. Fear of running out of money, uncertainty about future market performance, and even a lifetime of frugality can make it difficult to shift gears and embrace the freedom retirement brings.

At Towerpoint Wealth, we see this all the time: retirees who are so used to building their nest egg that they struggle to feel confident in spending it, even when their financial plan suggests they can. But here’s the good news: with the right income planning for retirement, you can face these challenges head-on and gain the confidence to live the retirement you’ve envisioned.

In this article, we’ll explore why spending in retirement can feel so hard, the importance of a sustainable retirement income plan, and practical strategies to align your spending with your goals. Whether you’re just entering retirement or are already in it, the key is finding the right balance between financial security and enjoying the life you’ve earned.

Key Takeaways

• Spending in retirement requires a strategy for overcoming emotional barriers and personalized income planning for retirement.
• A sustainable retirement income plan ensures financial security while allowing you to enjoy the lifestyle you’ve earned.
• Balancing growth investments like equities with less risky investments like bonds and cash can help protect your portfolio from market volatility.
• Working with a seasoned financial advisor helps address retirement fears, optimize investments, and align spending with your longer-term goals.

Why Does Spending in Retirement Feel So Difficult?

While we typically think of retirement and the significant shift in lifestyle, retirement also marks a new direction in your financial habits. For decades, you’ve been focused on building your savings, diligently setting aside a portion of your income to secure your future, and following your financial plan. Transitioning to spending that hard-earned nest egg can feel like stepping into uncharted territory, and for many retirees, it’s an emotional hurdle as much as a financial one.

Psychological Barriers to Retirement Spending

One of the biggest challenges retirees face as they approach their golden years is overcoming the fear of running out of money.

This concern is rooted in uncertainty — both about how long retirement will last and whether your savings can sustain unexpected expenses like healthcare or market downturns. For some, the thought of depleting savings can feel like losing a safety net they’ve spent years building.

There’s also typically a mindset barrier when transitioning from saving to spending. For many, saving is associated with responsibility and prudence, while spending can feel indulgent or even reckless. These deeply ingrained habits and beliefs can make retirees hesitant to enjoy the wealth they’ve worked so hard to accumulate.

Longevity and Uncertainty

We’re living longer than ever, which is both a blessing and a challenge when it comes to retirement planning.

The prospect of living to 95 or even 100 means retirees must plan for decades of expenses, often leading to overly conservative spending habits. Questions about potential economic downturns and outliving money can create anxiety and cause retirees to underspend, even when their financial plan shows they can afford to enjoy more.

Because of these concerns, studies consistently show that retirees tend to withdraw far less from their savings than they safely could. While many financial advisors recommend a 4% withdrawal rate to sustain retirement income, research shows that the average retiree withdraws only 2.1% annually. This cautious approach often leaves money on the table, money that could have been spent on meaningful experiences like travel, hobbies, or family.

At Towerpoint Wealth, we understand these concerns and help our clients address them head-on by creating a defined and sustainable retirement income plan and showing them exactly how much they can spend without feeling guilty or anxious.

The Importance of Income Planning for Retirement

The key to overcoming fears about spending in retirement lies in preparation. Retirement income planning isn’t just about figuring out a retirement budget — it’s about creating a strategy that gives you confidence in your financial future and helps you align your spending with your goals.

A well-thought-out retirement income plan, along with making sure you have enough set aside to retire, ensures you can enjoy the lifestyle you’ve worked so hard to build without worrying about running out of money.

Want to make sure you have enough to retire? Check out our free white paper, ‘Is $2 Million Enough to Retire?‘, which provides an in-depth look at how to evaluate your savings and determine whether your financial plan aligns with your goals.

What Is Retirement Income Planning?

Retirement income planning is a key component of financial planning for retirees, helping with the transition from saving to spending with a sustainable strategy for managing your nest egg. It considers all of your sources of income, anticipated expenses, and longer-term goals to ensure you can maintain financial security throughout retirement.

Unlike your working years, when income typically comes from a steady paycheck, retirement income often comes from multiple sources, including Social Security, pensions, investment accounts, and annuities. Balancing these sources while accounting for important factors like taxes, inflation, and market volatility, is critical to making your money last.

Key Components of a Sustainable Retirement Income Plan

Assess Your Expenses:

Start by breaking down your retirement budget into essential expenses (e.g., housing, healthcare, utilities) and discretionary expenses (e.g., travel, hobbies, gifts). Knowing how much you need to cover your fixed costs provides a baseline for how much income you’ll need to cover necessities while accounting for discretionary spending lets you enjoy retirement to the fullest.

Determine a Withdrawal Strategy:

Establish a reasonable withdrawal rate, using techniques such as the 4% rule, as a starting point. This rule has historically allowed retirees to sustain their savings over a 30 or even 40-year retirement. Alternatively, you may want to consider guardrails or dynamic withdrawal strategies that adjust based on market conditions and your personal needs.

Incorporate Guaranteed Income Sources:

Cover essential expenses with predictable income streams like Social Security, pensions, or annuities. Studies show that retirees with guaranteed income are more likely to spend confidently, since they know their basic needs are secure.

Account for Inflation and Taxes:

Over time, the cost of living rises, and your income plan must account for inflation if you want to preserve your purchasing power. Taxes on withdrawals from retirement accounts such as traditional IRAs or 401(k)s must also be factored into your spending plan.

The Benefits of Income Planning for Retirement

With a clear income plan in place, you can move beyond the uncertainty of retirement spending and focus on what matters most: enjoying this new phase of your life. Income planning not only provides peace of mind but also empowers you to spend in ways that align with your priorities, whether that’s traveling, pursuing hobbies, or spending time with family.

It’s important that you work with a trusted financial advisor to create an income plan that suits you and your preferences.

At Towerpoint Wealth, we specialize in helping retirees design personalized income plans that balance financial security with the freedom to live fully. By addressing your unique needs and goals, we work with you to create a roadmap for retirement spending that feels both sustainable and fulfilling.

Overcoming Retirement Fears

For many retirees, fear is the biggest barrier to fully enjoying their savings. Concerns about running out of money, unexpected expenses, or leaving a legacy often lead to overly cautious spending. While these fears are valid, they don’t have to define your entire retirement experience.

Common Fears

• Longevity Risk: The fear of outliving savings can cause retirees to underspend, even when they have a solid financial plan.
• Uncertainty: Healthcare costs, market fluctuations, and emergencies can create anxiety about financial stability.
• Identity Shifts: Decades of frugality can make spending feel irresponsible, even when it’s aligned with personal goals.

Retirement is the time to enjoy the life you’ve built. By focusing on what brings you joy — whether it’s travel, hobbies, or family – you can align your spending with your values and move past hesitation.

Shifting Your Mindset

Overcoming these fears often starts with reframing how you think about money and retirement.

Saving is a virtue, but spending in alignment with your values is just as important. Retirement is the time to enjoy the life you’ve built – traveling, pursuing hobbies, or creating memories with loved ones.

Ask yourself:

• What do I value most in this stage of my life?
• What experiences or goals would bring me the most joy and fulfillment?

Answering these questions can help you identity areas where spending aligns with your priorities, making it easier to let go of fear and embrace purposeful spending.

Practical Strategies for Spending in Retirement

Transitioning from saving to spending in retirement requires more than just a mindset shift; it also calls for practical strategies to ensure your spending aligns with your financial goals. By implementing a thoughtful approach, you can enjoy your wealth without fear of outliving it.

Build a Flexible Budget

Establish a retirement budget that sets a clear distinction between essential and discretionary expenses. This allows you to cover necessities like housing, healthcare, and utilities with

guaranteed income sources such as Social Security or pensions, and allocate savings or investments toward discretionary items like travel, hobbies, or gifts.

Segment Your Savings

Dividing your retirement savings into purpose-driven buckets can make spending feel more manageable and intentional. You can set aside funds for travel and experiences in one account and allocate money for emergencies or healthcare in another. This approach provides clarity and helps you feel more confident about using your savings for specific goals.

Engage in Meaningful Activities

Retirement offers the perfect opportunity to explore passions, stay socially connected, and give back. Consider:

• Pursuing hobbies like gardening, art, or learning a new skill.
• Volunteering or mentoring to create purpose and contribute to your community.
• Spending quality time with loved ones, such as family gatherings or trips with grandchildren.

If you’re not ready to fully step away from work, you can also consider part-time roles or consulting in your field to provide both intellectual engagement and financial benefits in retirement.

Revisit Your Plan Regularly

Your retirement isn’t going to be static – market conditions, inflation, and your personal goals may change. Regularly review your spending and income plan with your financial advisor to ensure it stays aligned with your needs and adapts to any new circumstances.

Embrace Small Luxuries

Allow yourself to enjoy the little things that bring you joy. Whether it’s an upgraded vacation or treating yourself to a new hobby, spending on what matters to you can enhance your retirement experience while staying within your plan.

The Role of Investing in Retirement

Even in retirement, your investment strategy remains a critical component of financial security.

While the focus often shifts from growing wealth to preserving it, knowing how to invest in retirement and maintaining a balanced approach to investing ensures your savings continue to support your lifestyle and long-term goals.

Balancing Growth and Stability

In retirement, it’s essential to strike a balance between growth and stability. While you want to protect your nest egg, some exposure to growth-oriented investments – such as equities and dividend-paying stocks — may help your portfolio keep pace with inflation and avoid the risk of outliving your savings.

On the other hand, stability investments, including bonds, Treasury Inflation-Protected Securities (TIPS), and other fixed-income assets, offer lower risk and predictable returns, helping to cushion against market volatility.

Adjusting Asset Allocation

Your asset allocation is a core aspect of financial planning for retirees, ensuring your mix of stocks, bonds, and other investments aligns with your income needs and risk tolerance. Your financial advisor can help you periodically reassess your allocation to ensure it aligns with your current situation and future goals.

Generating Retirement Income

Investments can serve as an important source of income in retirement, complementing Social Security and pensions. Consider strategies like investing in dividend-paying stocks and creating a plan for systematic withdrawals to help you draw from your portfolio without compromising its longevity.

Tax-Efficient Investing

Retirees must also consider the tax implications of their investments. Using strategies like Roth conversions, tax-loss harvesting, and proper asset location (placing tax-efficient investments in taxable accounts and tax-inefficient ones in retirement accounts) can potentially help reduce your overall tax burden.

Planning for Market Volatility

While market fluctuations are inevitable, having a diversified portfolio and a flexible withdrawal strategy can help minimize their impact on your financial plan. Staying focused on your long-term goals is a key practice to help weather short-term volatility.

The Bottom Line

Retirement is a time to celebrate your accomplishments and embrace the freedom to live life on your terms. While transitioning from saving to spending can feel challenging, having a sustainable income plan and clear financial strategy can replace your retirement fears with confidence.

Whether it’s prioritizing meaningful activities, managing investments, or aligning spending with your values, the key is to create a retirement that is both secure and fulfilling. With the right guidance, you can focus on what matters most — enjoying the life you’ve earned.

At Towerpoint Wealth, we specialize in helping retirees like you navigate this transition with personalized strategies and ongoing support. If you’re ready to take the next step toward a confident and purposeful retirement, we invite you to schedule a consultation with our team today.

Managing Capital Gains Distributions from Mutual Funds and ETFs

As the end of the year approaches, many investors may find themselves surprised by an unwelcome addition to their year-end taxes: year-end capital gains distributions from mutual funds and certain ETFs. 

These distributions, typically caused by fund managers selling securities within the fund throughout the calendar year, can create significant tax liabilities — even if you didn’t sell a single share of any of your investments. For investors in taxable accounts, this can feel like paying taxes on gains you didn’t directly benefit from, and can erode your net returns and decelerate your financial goals.

Understanding the impact of year-end taxes and capital gains distributions is essential for managing your tax burden and preserving as much of your portfolio’s value as possible. By being proactive and taking advantage of tax-efficient strategies, you can stay ahead of these unwanted surprises, and keep more of your hard-earned money invested for longer-term growth.

This is why a core wealth-building and wealth-protection philosophy here at Towerpoint Wealth emphasizes tax efficiency as a cornerstone of portfolio management. Tax-efficient investing isn’t just about minimizing taxes — it’s about strategically maximizing the longer-term potential of your wealth. 

In this article, we’ll explore the challenges of year-end taxes and capital gains distributions, and provide actionable strategies to help you mitigate their impact. Let’s dive into how you can turn this tax hurdle into an opportunity to boost your investment outcomes.

Key Takeaways

• Year-end capital gains distributions from mutual funds and some ETFs can create unexpected tax liabilities for investors, even if they didn’t actively sell their shares.
• These distributions are taxed as either short-term capital gains (ordinary income rates) or long-term capital gains (usually lower than ordinary income rates).
• Mutual funds are more prone to capital gain distributions than ETFs due to structural differences in how they manage redemptions and internal trading.
• To reduce the impact of these taxes, investors can:
  – Time investments carefully, avoiding purchases just before year-end distributions.
  – Prioritize tax-advantaged accounts for holding mutual funds that trade more frequently.
  – Generally, utilize ETFs in lieu of “regular” open-end mutual funds.
  – Choose tax-efficient investments.
  – Use tax-loss harvesting to offset capital gains and reduce taxable income.
• Regular portfolio reviews and proactive communication with a financial advisor can help you stay ahead of potential tax issues.

What Are Year-End Capital Gains Distributions?

Let’s start by discussing what year-end capital gains distributions are and how they affect your portfolio.

Year-end capital gains distributions are a common, but often misunderstood, part of investing in mutual funds and certain ETFs. They result from fund managers selling securities within the fund to rebalance the portfolio, manage risks, or fulfill investor redemptions. By law, the gains from these sales are passed along to shareholders as taxable distributions, even if you didn’t sell any of your shares in the fund.

For many investors, this creates a confusing and frustrating tax situation; though you may not have sold a single share, you’re still responsible for paying taxes on the fund’s realized gains. These distributions typically happen in the fourth quarter of the year, leading to an unwelcome surprise when next year’s tax season rolls around.

Mutual Funds vs. ETFs: Why Are Mutual Funds More Affected?

Mutual funds are more prone to year-end capital gains distributions than ETFs due to differences in their structure. When mutual fund investors redeem their shares, fund managers often need to sell securities within the fund to raise cash to meet the redemption. This creates taxable gains, which legally are required to be distributed proportionally to all investors in the fund.

On the other hand, ETFs use an “in-kind” redemption process that involves exchanging securities with market makers, instead of selling them directly. This process minimizes the taxable gains that are passed on to ETF shareholders, making ETFs generally more tax-efficient. 

However, it’s important to note that certain ETFs can still distribute capital gains under specific circumstances, particularly those that trade less liquid or complex securities.

Why Year-End Capital Gains Distributions Matter

Year-end distributions can have a significant impact on your financial situation, especially if you hold mutual funds in a non-retirement “taxable” account. These distributions are reported on your 1099, and are taxed as either short-term or long-term capital gains, depending on how long the fund held the securities before selling them.

For investors, this creates two main issues:

1. Unexpected Tax Bills: If you’re not anticipating a distribution, it can upend your financial plans, forcing you to pay taxes you didn’t account for.
2. Reduced Returns: Taxes on distributions eat into your investment gains, reducing your portfolio’s net overall performance.

This problem is worsened for those who invest in a mutual fund late in the year. Even if you’ve only held the fund for a few weeks, you could still be on the hook for the entire year’s distribution. That’s why understanding a fund’s distribution schedule and structure is crucial when investing.

Year-end capital gains distributions are more than just a tax nuisance — they can erode your portfolio’s overall efficiency over time. However, by knowing how they work and why they happen, you can take steps toward mitigating their impact and aligning your investments with your long-term financial goals.

How Capital Gains Distributions Impact Investors

Year-end capital gains distributions may seem like a routine part of investing, but they can have significant implications for both your portfolio’s performance and your year-end taxes and tax bill. For many investors, the effects of these distributions can feel out of their control, which is why understanding the potential impact is crucial for making informed decisions about how and where you invest.

The Tax Consequences of Capital Gains Distributions

As mentioned, when mutual funds or ETFs distribute capital gains, they are taxed as either short-term capital gains, which are taxed at your ordinary income rate, or long-term capital gains, which are taxed at lower rates depending on your income level.

Regardless of the type, these taxes can quickly add up and reduce the overall value of your investments. For example, if a mutual fund distributes $10,000 in capital gains and you’re in a 20% long-term capital gains tax bracket, you owe $2,000 in taxes, even if you didn’t sell any shares.

This tax liability is particularly burdensome for investors who hold mutual funds in taxable accounts. While tax-advantaged accounts like IRAs or 401(k)s shield you from immediate taxes, distributions in taxable accounts directly impact your finances today.

Erosion of Returns Over Time

Year-end capital gains distributions don’t just result in a one-time tax hit — they can have a lasting effect on your portfolio’s growth. Taxes paid on distributions reduce the amount of money you have available to reinvest, which limits the power of compounding over time.

Let’s consider two investors: one who consistently reinvests distributions without tax implications (in a tax-advantaged account) and another who pays taxes on distributions in a taxable account. Over decades, the investor in the tax-advantaged account will likely see significantly higher growth because their funds remain fully invested.

Unexpected Timing and Financial Strain

One of the most frustrating aspects of year-end capital gains distributions is their timing. Investors who buy into a mutual fund late in the year may still be responsible for the entire year’s gains. This means you could owe taxes on profits realized by the fund before you even invested.

If you purchase shares in a mutual fund on December 1, and the fund makes a large distribution on December 15. Even though you’ve held the fund for less than a month, you’ll owe taxes on your portion of the distribution, which could significantly impact your expected returns.

Why It Matters

The financial and emotional toll of capital gains distributions can be substantial. Unexpected tax bills and reduced returns can affect your overall financial plans, forcing you to adjust your budget or sell assets to cover the tax burden — and creating a significant amount of stress in the meantime. This is why proactive planning and strategic portfolio management are critical for minimizing these impacts.

Strategies to Manage and Prevent Capital Gains Tax Complications

While year-end capital gains distributions can create unexpected tax liabilities, there are strategies you can implement to mitigate or even prevent their impact. By taking a proactive approach to your investments, you can minimize taxes and keep more of your money working toward your financial goals.

Time Your Investments Carefully

One of the simplest ways to avoid unexpected capital gains taxes is to be mindful of when you invest in mutual funds. Before purchasing shares, especially late in the year, check the fund’s distribution schedule. Buying into a mutual fund just before it makes a distribution could result in an immediate tax bill on gains you didn’t benefit from.

To avoid this, you can review the fund’s website or contact the fund company to find out when distributions are expected. You can then delay your purchase until after the distribution if you’re investing in a taxable account. This strategy ensures you’re not inadvertently inheriting an unexpected tax liability when making new investments.

Make the Most of Tax-Advantaged Accounts

Placing mutual funds in tax-advantaged accounts like IRAs, 401(k)s, or Health Savings Accounts (HSAs) can help shield you from immediate taxes on capital gains distributions. Because these accounts defer or eliminate taxes on growth, they are an excellent choice for holding investments that are prone to taxable events.

For example, a Traditional IRA allows you to defer taxes on distributions until you withdraw the funds in retirement. A Roth IRA, on the other hand, allows your investments to grow tax-free, meaning you won’t owe taxes on distributions or withdrawals (as long as certain conditions are met). 

By prioritizing tax-advantaged accounts for funds that frequently distribute capital gains, you can reduce your overall tax liability and maximize your portfolio’s growth potential.

Choose Tax-Efficient Investments

Not all funds are created equal when it comes to tax efficiency. Certain types of funds, like index funds and some ETFs, tend to generate fewer taxable events than actively managed mutual funds.

Index funds, for example, track a market index and require less trading, which results in fewer realized capital gains. Exchange-traded funds (ETFs), on the other hand, are designed with a unique structure that minimizes taxable events, making them an ideal choice for taxable accounts.

Another option to consider is tax-managed funds. These funds are specifically designed to minimize taxable distributions by implementing strategies like loss harvesting and low-turnover trading.

Take Advantage of Tax-Loss Harvesting

Tax-loss harvesting can be an effective strategy for reducing taxable gains by using losses from underperforming investments to offset them. This works by selling investments that have declined in value to combat the capital gains from distributions or other profitable sales. 

For example, if a mutual fund distributes $5,000 in capital gains, you could sell a stock or another investment with a $5,000 loss to eliminate the taxable income. If your losses exceed your gains, you can offset up to $3,000 of ordinary income annually, with any additional losses carried forward to future tax years. 

By proactively managing your portfolio throughout the year, tax-loss harvesting can help you minimize your tax burden and support your overall financial plan.

Work With a Financial Advisor

Navigating the complexities of capital gains distributions and tax-efficient investing can be overwhelming, especially as year-end deadlines approach. A financial advisor can help by providing personalized guidance tailored to your unique financial situation, goals, and preferences.

Advisors can help you identify funds that are prone to distributions and recommend alternatives. They can also help you optimize your portfolio by placing the right assets in the right accounts and using tax-loss harvesting strategies to minimize your tax liability.

At Towerpoint Wealth, we make decisions with the understanding that minimizing taxes is a crucial part of helping our clients achieve their long-term financial goals, which is why tax efficiency is a focus for all of our investment strategies. 

By working with a financial advisor to optimize your investments for tax considerations, you can work to get the most out of your assets and preserve your nest egg for long-term growth.

Proactive Communication and Planning

Our last, but critical strategy for managing capital gains tax complications is proactive communication and planning. By regularly reviewing your portfolio and staying informed about upcoming distributions, you can make more strategic decisions about your investments and avoid costly surprises.

Closely monitoring the funds in your portfolio can help you to stay aware of your upcoming tax liabilities. Many mutual funds and ETFs provide distribution estimates in the fourth quarter, which can give you a clear picture of potential tax liabilities. 

Reviewing these estimates with your financial advisor or on your own can help you determine how they might impact your overall tax situation and act accordingly. If a fund is planning a significant distribution, you may want to take action, such as selling your shares before the distribution in a taxable account, to avoid inheriting a tax liability.

It’s also important to think ahead about your overall financial goals. Do you need liquidity in the near future? Are you planning to rebalance your portfolio or make new investments before the end of the year? By aligning these objectives with your tax strategy, you can make more efficient decisions that support your broader financial plan. Keeping open communication with your advisor and planning your objectives beforehand is key in mitigating unnecessary tax complications.

Final Thoughts

As we have discussed, year-end capital gains distributions can pose a significant challenge for investors, creating unexpected tax liabilities and reducing the portfolio’s overall returns. However, with the right strategies — such as careful timing, using tax-advantaged accounts, opting for tax-efficient investments, and implementing strategies like tax-loss harvesting — you can take control of your tax situation and minimize the impact of these distributions.

Proactive planning and regular portfolio reviews are essential to ensuring your investments remain aligned with your financial goals. At Towerpoint Wealth, we focus on tax efficiency as a cornerstone of our investment approach, helping our clients maximize their wealth and keep more of their returns working toward their future. 

If you want to learn how we can help you build a tax-efficient portfolio that supports your long-term goals, we welcome speaking with you.

By staying informed and working with experienced professionals, you can turn the stress of year-end capital gains distributions into an opportunity to strengthen your financial plan and feel confident in your future. 

Joseph Eschleman, CIMA®
President

Jonathan W. LaTurner
Partner, Wealth Advisor

Steve Pitchford, CPA, CFP®
Director of Tax and Financial Planning

Lori A. Heppner
Director of Operations

Nathan P. Billigmeier
Director of Research and Analytics

Michelle Venezia
Client Service Specialist

Luis Barrera
Marketing Specialist

 Megan M. Miller, EA
Associate Wealth Advisor

Isabelle Orozco
Office Coordinator

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What It Means for Investors and the Future of the Dow Jones Industrial Average Index

The Dow Jones Industrial Average (DJIA), or “The Dow,” is a popular and widely-followed stock market index, a core benchmark of investor sentiment and economic health. Understanding this 30-stock index is not static, each Dow Jones update reflects shifts in the U.S. economy, as well as the overall market and investment landscape. 

Recently, the Dow has taken a step forward to add an innovative and fast-growing company, attempting to be a more accurate gauge of current market and economic trends. 

The DJIA has long acted as a barometer for market sentiment, reflecting the confidence, concerns, and trends driving investor decisions and the overall U.S. economic outlook. Recently, it was announced that Nvidia, a powerhouse in the A.I. and technology industry, will replace Intel in this index. This recent Dow Jones update marks a major shift in the Dow, reflecting the growing influence of AI and semiconductor technologies.

As Nvidia steps into and Intel steps out of the Dow, many investors are left wondering how this change will affect their portfolios. In this article, we are going to analyze The Dow and its historical role in the stock market, and the effect that Nvidia’s inclusion may have on the index.

Key Takeaways

• Nvidia has replaced Intel in the Dow Jones Industrial Average, reflecting the rising influence of AI and semiconductors. 
• The Dow regularly updates its lineup to mirror market and economic shifts, helping it stay relevant as a benchmark index.
• Nvidia’s inclusion may drive new interest and demand in the stock, possibly impacting its stock value.
• Nvidia’s presence may enhance the Dow’s performance, especially given tech and AI’s growing role in the economy.
• This Dow Jones update highlights the importance of emerging tech sectors, potentially attracting new investors.

What is the Dow Jones Industrial Average?

The Dow Jones Industrial Average, first introduced in 1896 by Charles Dow, is one of the oldest and most influential stock market indices. It was created to offer a snapshot of the industrial sector’s health by tracking a group of prominent U.S. companies. 

Over time, however, the index has evolved, representing a broader host of industries to better reflect the diverse U.S. economy. Today, the Dow consists of 30 leading companies across sectors such as technology, healthcare, finance, and consumer goods.

Unlike other indices that are market capitalization-weighted, the Dow is price-weighted. This means that companies with higher stock prices influence the index more than those with lower prices. For example, a large movement in the price of a high-priced stock, like UnitedHealth or Goldman Sachs, will have a more significant effect on the DJIA than a comparable move in a lower-priced stock.

The index is maintained by S&P Dow Jones Indices, and its components are selected by a committee. Companies are included based on their economic significance, stability, and representation of critical U.S. economic sectors. Importantly, the index is not static; it is periodically reviewed to ensure it accurately reflects shifts in the economy. Companies may be added or removed based on their performance, relevance, and role in the market. This adaptability is essential for maintaining the Dow’s position as an accurate measure of U.S. economic health.

Recent Changes in the Dow

Before Nvidia’s addition to the Dow, the most recent rearrangement took place in February, when Amazon replaced Walgreens (WBA). Walgreens had been struggling for some time, and its underperformance led the Dow to seek more exposure to the consumer retail sector. 

Prior to that, the Dow made significant changes, removing ExxonMobil, Pfizer, and Raytheon Technologies (formerly Raytheon) in favor of Salesforce, Amgen, and Honeywell in 2020. These new additions have generally outperformed the broader market, with the notable exception of Exxon, whose stock struggled due to the pandemic’s impact on oil prices. 

These shifts in the DJIA index underscore the Dow’s role in adapting to changing industries and economic forces. Companies are regularly removed when they no longer are deemed a “good” representation of the current market landscape, with many of them seeing initial declines in their stock prices after being ousted. 

Nvidia Joins the Dow

The decision to add Nvidia, a leader in graphics processing units (GPUs), artificial intelligence, and data processing, reflects the tech sector’s rapid evolution and the shift towards AI-driven industries. 

Nvidia has been instrumental in powering industries from gaming to machine learning, and its advanced chips are the foundation of AI innovation. The company’s relevance to the modern economy — and the tech sector’s future — made it an ideal addition to the Dow.

Notably, this switch is more symbolic than material, as the Dow is just one index that is used to measure the health and success of the market. As Nvidia joins the Dow Jones Index’s current lineup, its presence signals the stock market’s commitment to AI, automation, and digital innovation, influencing both Nvidia stock forecasts and investor interest in the tech sector. Investors are likely to view this change as a signal that these areas continue to be central to U.S. economic growth, and that the companies behind them may be among the strongest players in the market. 

As Nvidia enters the DJIA index, investors might want to watch Nvidia’s stock forecast closely, assessing its growth potential in AI-driven sectors.

Nvidia’s Background and Historical Stock Performance

Founded in 1993, Nvidia (NVDA) started as a gaming chip manufacturer but quickly evolved into a leader in high-performance computing. Its GPUs became essential to gaming, but Nvidia soon saw the potential for its technology to drive other innovative industries, including data centers, AI, and autonomous vehicles. 

NVDA’s growth has been fueled by its focus on research and development (R&D), and the development of powerful, versatile chips. Nvidia’s stock performance also reflects this growth. Over the past decade, Nvidia’s shares have risen dramatically, driven by strong revenue and earnings growth, driven by increasing demand for its technology. Nvidia’s stock grew by 239% in 2023 alone!

Nvidia is also part of the “Magnificent 7” group of stocks, a group of tech giants driving much of the S&P 500’s gains in recent years. Its inclusion with these Magnificent 7 stocks showcases Nvidia’s standing among the elite companies shaping the future of technology.

Intel’s Role in the Dow

Intel (INTC), a pioneering force in computer processors, was added to the Dow in 1999, during a time when personal computing was rapidly expanding. 

Intel played a central role in the growth of personal computing and the Internet, and its processors became recognized for high-quality computing power. However, in recent years, Intel has struggled with competition and shifting demands. While it remains a leader in the semiconductor industry, Intel has faced pressure from companies like AMD and Nvidia, especially in high-performance computing and AI applications.

The decision to remove Intel from the Dow is largely due to its recent struggles to keep up with industry changes. Although Intel still has a significant market share, its slower adoption of new technologies and recent challenges have diminished its appeal, compared to Nvidia, whose growth trajectory and market leadership align it better with the Dow’s representation of industry leaders.

Implications for the Dow and Investors

Thinking about investing in Nvidia? Here’s what you should know.

Nvidia’s addition to the Dow is a strong statement about the prominence of AI and data processing in the modern economy. Nvidia brings a fresh, high-growth tech component to the Dow that Intel, despite its achievements, could no longer offer. This shift also highlights the broader trend of high-tech, AI-driven industries becoming more integral to the U.S. economy. 

As the Dow’s current lineup becomes increasingly tech-centric, Nvidia’s stock forecast will be of interest to investors looking for AI-driven growth.

For Nvidia investors, this Dow Jones update serves as an endorsement of the company’s AI-driven growth potential, with many closely watching Nvidia stock forecasts to forecast future performance. Nvidia’s stock could see increased demand due to the index’s broader market exposure, potentially driving up its price further as institutional investors who track the Dow may begin to allocate more capital to Nvidia.

For new investors, Nvidia’s inclusion could signal a strategic opportunity. As a tech leader and a key player in the future of AI, the stock offers long-term growth potential. However, it’s essential to keep in mind that Nvidia’s price may already reflect much of this growth, meaning any short-term gains could be tempered by market fluctuations. 

Before allocating investments in response to this event, investors should consider whether Nvidia fits within their long-term portfolio goals, especially since tech stocks are often more volatile than those in other sectors.

The Dow itself stands to benefit from Nvidia’s inclusion. As a leader in the semiconductor industry and a key player in the AI sector, Nvidia represents the growing influence of technology on the broader economy. The inclusion of such a forward-looking company emphasizes the Dow’s adaptability and commitment to staying relevant in the face of rapidly changing market and economic trends. This shift may also attract more interest from investors focused on technology and innovation, potentially increasing the overall performance of the index over time.

Ultimately, as with any major market change, it’s important for you, as an investor, to consult with your financial advisor before making any decisions about adjusting your portfolio. While Nvidia’s inclusion in the Dow is an exciting development for tech and AI enthusiasts, every investment decision should align with your longer-term financial goals, risk tolerance, and investment strategy. 

Working with an advisor can provide valuable insights into how such changes may impact your portfolio and help you navigate market trends effectively.

Final Thoughts

As Nvidia replaced Intel in the index, the growing importance of sectors like AI and semiconductors is becoming much more apparent to investors. 

This shift in the Dow Jones index’s current lineup highlights the Dow’s adaptability to economic trends and could shape future Nvidia stock forecasts, reinforcing the index’s role as a vital measure of market sentiment and the U.S. economy. For Nvidia investors, this inclusion could increase stock demand, while new investors may see it as a long-term growth opportunity.

If you’re considering making significant changes to your portfolio following this news, we recommend that you meet and consult with a trusted financial advisor. Each decision that you make should be in line with your preferences, goals, and time horizon — NOT as a knee-jerk reaction to recent trends in the market.

At Towerpoint Wealth, a Sacramento Investment Advisor Firm, we work intimately with our clients to create a disciplined plan and strategy that aligns with their shorter and longer-term personal and economic goals. If you want to talk with an experienced advisor to decide if you should adjust your investment strategy, we welcome speaking with you.

Investing in individual stocks involves significant risks that investors should carefully consider. These risks include, but are not limited to: Market Volatility: The value of individual stocks can fluctuate widely due to market conditions, economic events, geopolitical developments, or company-specific news. Business-Specific Risk: Individual companies face unique risks such as declining revenues, management changes, operational challenges, or financial instability. Poor performance or bankruptcy of a company could result in a total loss of your investment. Concentration Risk: Investing in a single stock or a small number of stocks increases exposure to the risks of those particular companies, reducing diversification benefits and potentially amplifying losses. Lack of Liquidity: Some stocks, especially smaller-cap or less-traded ones, may have low liquidity, making it difficult to buy or sell shares at a desired price. Time Commitment: Properly researching and monitoring individual stocks requires time, effort, and expertise to stay informed about the company’s performance, industry trends, and market conditions. Unpredictable Events:
Natural disasters, regulatory changes, litigation, or unforeseen crises can adversely affect individual stocks, regardless of their previous performance. Emotional Decision-Making: Investors may react emotionally to short-term market fluctuations, leading to poor decisions such as panic-selling or overbuying.

Important Reminder: Past performance of a stock is not indicative of future results. Investing in individual stocks carries no guarantees, and investors should be prepared for the possibility of losing some or all of their principal investment.

Recommendation: Diversification and consultation with a qualified financial advisor can help mitigate these risks. Ensure any investment decisions align with your financial goals, risk tolerance, and time horizon.

This newsletter is for informational purposes only and should not be construed as personalized investment advice.

Joseph Eschleman, CIMA®
President

Jonathan W. LaTurner
Partner, Wealth Advisor

Steve Pitchford, CPA, CFP®
Director of Tax and Financial Planning

Lori A. Heppner
Director of Operations

Nathan P. Billigmeier
Director of Research and Analytics

Michelle Venezia
Client Service Specialist

Luis Barrera
Marketing Specialist

 Megan M. Miller, EA
Associate Wealth Advisor

Isabelle Orozco
Office Coordinator

 Connect with Towerpoint Wealth, your Sacramento Financial Advisor, on any of these platforms, and send us a message to share your preferred charity.

We will happily donate $10 to it!

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Preparing for the Tax Cuts and Jobs Act (TCJA) Expiration at the end of 2025 and Its Impact on Taxes

The clock is ticking on one of the most significant tax overhauls in recent history. As the sun is “set to set” on the Tax Cuts and Jobs Act (TCJA) at the end of 2025, millions of Americans are now wondering, “What might my 2026 tax bill look like?”

The TCJA of 2017 brought sweeping changes to the U.S. tax code, impacting everything from individual income tax rates and the standard deduction, to estate tax exemptions, mortgage interest, and charitable donation deductions. 

For many Americans, these changes have meant lower taxes and simplified filing processes, but these benefits were not written nor legally allowed to last forever. Many of the key provisions that were introduced under the TCJA are set to expire, or “sunset” at the end of 2025, creating a significant possible shift in the tax landscape that could affect millions of taxpayers if the legislation is not extended.

The TCJA expiration could mean a higher tax bill for you, fewer deductions, and a possible shift in how you plan for your financial future. Whether you’re concerned about your income tax rate, the standard deduction, or tax credits that benefit your family, it’s crucial to understand how these changes could impact your bottom line and what steps you can take to prepare.

In this article, we’ll explore what you can expect ahead of a possible TCJA expiration, and considerations on how you can proactively adjust your financial strategy to stay ahead of these potential tax changes.

Key Takeaways

• Many Tax Cuts and Jobs Act (TCJA) provisions are set to expire, or “sunset,” at the end of 2025, potentially leading to higher tax bills and fewer deductions for many taxpayers.
• Key provisions at risk of expiration include the increased standard deduction, lower income tax rates, the Child Tax Credit, state and local tax (SALT) deductions and more.
• If the TCJA expires, the standard deduction will decrease significantly, making itemized deductions more relevant again, impacting how taxpayers calculate their taxable income.
• The 20% deduction for qualified business income will no longer be available for small business owners, increasing their tax liability.
• It is uncertain if Congress will extend the expiring tax provisions.
• Consulting with a financial advisor can help you develop strategies to mitigate these potential tax impacts, and optimize your financial planning ahead of the potential changes.

What is the Tax Cuts and Jobs Act (TCJA)

The Tax Cuts and Jobs Act (TCJA) of 2017 was a landmark reform of the U.S. tax code, bringing about significant changes for both individuals and businesses. Passed by Congress and signed into law by President Donald Trump, the act aimed to stimulate economic growth by reducing taxes for individuals and businesses. 

Thanks to the TCJA, many individuals enjoyed lower tax rates, a bigger standard deduction, and improved tax credits — like the Child Tax Credit — that put more money back in their pockets. On the corporate side, it significantly reduced the corporate tax rate, from 35% to 21%, and introduced incentives for businesses to invest in the U.S.

While many of the TCJA’s changes were permanent, several key provisions for individuals, like lower tax brackets and the higher standard deduction, were temporary and are set to expire at the end of 2025. 

Key Expiring Tax Provisions in 2025

As the TCJA nears its expiration date at the end of next year, several major provisions are set to sunset, significantly impacting individual taxpayers. Understanding these key changes can help you anticipate how your tax situation may shift and what adjustments may be necessary for your financial planning.

Standard Deduction and Personal Exemption

One of the most widely felt changes under the TCJA was the near doubling of the standard deduction, which simplified tax filing and created significant tax savings for millions of Americans. For 2026, the standard deduction for married couples filing jointly would be roughly $30,600 without a TCJA expiration, while single filers would enjoy a deduction of $15,350. 

However, if the TCJA expires as scheduled, the standard deduction will drop dramatically. Come 2026, married couples filing jointly could see it shrink to around $16,600, while single filers might only get about $8,300.

Additionally, the TCJA eliminated personal exemptions, which used to provide tax relief for dependents. When the act expires, personal exemptions will return, with each exemption set to be around $5,275. While the return of personal exemptions might offset the lower standard deduction for some families, the overall impact could be a much more complex tax filing process and higher taxable income for others.

Individual Income Tax Rates

Another major change under the TCJA was the reduction of marginal income tax rates across the board. For example, the top marginal tax rate fell from 39.6% to 37%, while the rates for lower tax brackets also saw impactful reductions. If the TCJA expiration happens, these rates are expected to revert to their pre-2017 levels, meaning higher income tax rates for virtually all taxpayers.

Here’s a brief look at how some of the tax brackets will change for single filers if the TCJA expires:

• The 12% bracket will revert to 15%.
• The 22% bracket will revert to 25%.
• The 24% bracket will revert to 28%.
• The 32% bracket will revert to 33%.
• The 37% bracket will revert to 39.6%.

This hike in tax rates could mean heavier tax bills for many, and may require adjustments to tax-saving strategies like retirement contributions or charitable giving.

State and Local Tax (SALT) Deduction

The TCJA placed a $10,000 cap on the state and local tax (SALT) deduction, which primarily affected high-income earners in states with high property and/or income taxes. If the Act expires, the SALT deduction cap will be removed, allowing taxpayers to deduct the full amount of their state and local taxes. This change will disproportionately benefit taxpayers in high-tax states — such as California, New York, and New Jersey.

For individuals in these states, the restoration of the full SALT deduction could result in significant tax savings. However, it’s important to note that while this may benefit some taxpayers, the loss of other TCJA provisions could offset these savings.

Child Tax Credit

The TCJA increased the Child Tax Credit (CTC) from $1,000 to $2,000 per child under age 17, creating a substantial tax benefit for families. It also raised the income thresholds at which the credit phases out, allowing more middle and upper-income families to also take advantage of the credit. For 2024, the refundable portion of the credit is set at $1,700.

Should the TCJA expire, families could see the Child Tax Credit drop back to just $1,000 per child, which, when adjusted for inflation, would be about 25% less than its 2017 value. This reduction would place a heavier tax burden on families, particularly those with multiple children, and could necessitate adjustments in budgeting or saving for future expenses.

20% Deduction for Qualified Business Income (Section 199A)

Small business owners and individuals with pass-through income — such as sole proprietors, partners, and S-corporation owners — benefited from the TCJA’s 20% deduction for qualified business income (QBI). This deduction allowed eligible taxpayers to reduce their taxable income by up to 20%, resulting in substantial tax savings for many small business owners.

If the TCJA expires, this deduction will no longer be available, meaning that small business owners could face higher tax bills. This change may prompt business owners to explore other tax-saving strategies or restructure their operations to minimize the impact.

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) was designed to ensure that high-income taxpayers pay a minimum amount of tax, regardless of how many deductions or credits they claim. The TCJA raised both the exemption amounts and the income thresholds at which the AMT applies, reducing the number of taxpayers subject to the AMT.

In the event of the Tax Cuts and Jobs Act Expiration, the AMT exemption will drop significantly — from approximately $140,300 for married couples filing jointly in 2024 to around $110,075 in 2026. This could mean that more taxpayers, particularly high earners, may find themselves subject to the AMT again, potentially resulting in higher tax liabilities.

Estate Tax Exemption

For individuals concerned about estate planning, the TCJA also doubled the estate tax exemption, providing significant tax relief for wealthy families. Under the TCJA estate tax exemption, this exemption would be $28.6 million for married couples in 2026, meaning only estates valued above this amount are subject to the federal estate tax.

However, if the TCJA expires, the estate tax exemption will fall to approximately $14.3 million for married couples. This reduction could expose more estates to federal estate taxes, and may require estate planning strategies, such as gifting or the creation of trusts, to minimize the tax burden on heirs.

Will the TCJA be Extended?

As we approach 2025, many individuals and businesses are left wondering: will the Tax Cuts and Jobs Act (TCJA) be extended? 

The reality is that the future of these provisions remains uncertain. While some political leaders advocate for extending favorable tax measures, including lower tax rates and increased deductions, there is no definitive answer yet.

As part of his campaign for the 2024 Presidential Election, former President Donald Trump has expressed a desire to extend all expiring provisions, signaling support for maintaining the benefits that many taxpayers have enjoyed since the TCJA was enacted.  

Vice President Kamala Harris, on the other hand, has indicated that any discussions around tax increases should avoid impacting those earning less than $400,000, suggesting that certain provisions may be preserved for middle-income earners.

Ultimately, the decision lies in the hands of Congress and our new President, and their actions leading up to the expiration deadline will be crucial. Given the uncertain political landscape and the varying opinions on taxation, it’s conceivable that lawmakers might step in to extend at least some of these temporary provisions. 

However, until a resolution is reached, there is still uncertainty as to what may happen next. It’s wise for individuals and businesses alike to remain vigilant and consult their financial advisors to navigate the evolving tax landscape effectively.

How Can I Prepare for These Expirations?

With the potential expiration of key provisions of the Tax Cuts and Jobs Act (TCJA) looming, individuals and businesses should take proactive steps to assess how these changes could affect their finances. Financial advisors can be key partners in helping you navigate this transition and minimize any negative impacts on your income and overall financial situation.

For individuals, your advisor can review your income, deductions, and credits to understand how expiring provisions like the lower tax rates, increased standard deduction, and enhanced child tax credit will affect your tax liability. They can also recommend tax-efficient strategies — such as accelerating income or charitable giving before any potential tax changes take effect — or maximizing retirement contributions to reduce taxable income.

Businesses, on the other hand, can benefit from working closely with their financial advisor to review the potential loss of the 20% deduction for qualified business income and other favorable provisions for pass-through entities. 

Advisors can also help business owners reassess their corporate structure, and determine whether it makes sense to make changes ahead of the tax shift, ensuring that you’re well-positioned to handle a potentially higher tax environment.

Ultimately, planning ahead with your financial advisor can help you avoid surprises in the next two years,and create strategies that better protect your financial future if the TCJA provisions do expire.

Final Thoughts

As the expiration of the Tax Cuts and Jobs Act (TCJA) approaches at the end of 2025, individuals and businesses need to stay informed about the potential changes to key tax provisions. 

A significant reduction in the standard deduction, a return to higher individual income tax rates, and the elimination of the 20% deduction for qualified business income could all impact financial situations substantially. The reinstatement of personal exemptions and the removal of the SALT deduction cap may also alter how taxes are calculated, especially for those in high-tax states.

Given the uncertainty surrounding whether Congress will extend these expiring tax provisions in 2025, it’s imperative that you consult with your financial advisor to proactively assess your tax strategy. They can help you navigate these changes, optimize your financial planning, and prepare for possible shifts in tax liability. 

At Towerpoint Wealth, we know that staying ahead of the curve now can ensure you’re better positioned to handle the implications of the TCJA’s expiration, allowing you to make informed decisions that support your financial goals. If you’re worried about how expiring provisions of the TCJA could affect your tax bill, we invite you to schedule an initial 20-minute “Ask Anything” discovery call with us to see how our wealth advisors can help you navigate your financial planning.

Want to learn more about proposed tax policies ahead of the 2024 election? Check it out here!

Joseph Eschleman
Certified Investment Management Analyst, CIMA^®

Jonathan W. LaTurner
Wealth Advisor

Steve Pitchford
CPA, Certified Financial Planner^®

Lori A. Heppner
Director of Operations

Nathan P. Billigmeier
Director of Research and Analytics

Michelle Venezia
Client Service Specialist

Luis Barrera
Marketing Specialist

 Megan M. Miller, EA
Associate Wealth Advisor

Isabella Orozco,
Office Coordinator

 Connect with Towerpoint Wealth, your Sacramento Financial Advisor, on any of these platforms, and send us a message to share your preferred charity.

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Welcome to the Halloween edition of Trending Today! 

While this spooky season is often about tricks, treats, and eerie surprises, when it comes to investing, the real question is whether your choices lead to tricks or treasure. 

In this article, we’ll explore the allure of owning gold and precious metals in your portfolio — assets that can feel like treasure, but might hold some tricky surprises if you don’t fully understand them.

Over the past 12 months, gold has increased more than 38%, drawing more investors seeking protection from market volatility and inflation. But is it really the treasure your portfolio needs? Or could it be a tempting trick? Let’s talk about it!

Key Takeaways

• Gold has seen significant price increases in 2024, driven by inflation concerns, economic uncertainty, and market volatility.
• Gold is traditionally viewed as a safe haven during inflationary periods, helping to preserve purchasing power over time.
• Gold can act as a stabilizing asset, reducing overall portfolio risk by providing a counterbalance to other investments.
• Investors can invest in gold through various methods, including physical gold, gold ETFs, digital gold platforms, and gold mining stocks.
• Alternatively, the lack of income generation can be a turnoff for investors, as gold doesn’t produce dividends or interest like stocks or bonds. Investors rely solely on price appreciation for returns, which can limit growth during periods of low gold prices.

A Timeless Treasure

Gold’s appeal as a store of value dates back thousands of years, long before the invention of modern currencies or financial markets. 

Ancient civilizations used gold not only as a medium of exchange, but also as a symbol of wealth and power. As a tangible asset that cannot be printed or artificially produced, gold’s finite supply has helped it maintain its status as a trusted store of wealth throughout human history.

Beyond gold, precious metals like silver, platinum, and palladium have also played essential roles in both economies and industries. While gold is often seen as a safe haven during times of economic and political uncertainty, other metals have more specialized purposes. 

For example, silver’s value is driven by both its industrial applications and its use in jewelry, while platinum and palladium are crucial in automotive manufacturing, particularly in catalytic converters for reducing emissions.

The long-lasting appeal of these metals comes from their intrinsic value and scarcity, which can make them resilient against the devaluation of paper currencies and financial instability in the market.

Gold as a Hedge Against Inflation

Much of the allure of gold (aside from the allure of gold itself!) comes from the perception that gold is a powerful hedge against inflation. 

Inflation occurs when the cost of goods and services rises over time, eroding the purchasing power of money. A postage stamp today costs $0.73. It would have only cost you $0.10 to mail that same letter in 1974! 

For investors, inflation poses a significant risk because it can diminish the real value of the return on your portfolio, especially for assets like bonds or cash, which have fixed or low returns.

When inflation rates rise, the value of paper money tends to decline, but gold — a tangible asset — is believed to hold or increase in value. This is because gold’s supply is relatively limited, and its value is not tied to any particular currency or government policy. 

Thanks to gold’s relatively low, or even negative, correlation to other assets, gold tends to be a place to run for investors worried about maintaining the value of their portfolios.

Historically, during periods of high inflation, investors have flocked to gold to preserve their wealth. For instance, during the inflationary 1970s, gold prices in grams surged, providing refuge for those looking to protect their purchasing power.

Does this mean you should stockpile gold when inflation runs high?

Well, since the 1970’s, gold has been less effective as an inflation hedge. In some low inflation or even deflationary environments, gold may underperform, and has appeared to do so in recent years. 

Since 1972, the average ratio of gold’s price to the Consumer Price Index (CPI) was about 3.6. In 2024, that ratio is around 6.4, which tells us that gold’s value does not remain relatively constant compared to the CPI — as you would expect from a reliable inflation hedge.

As you can see from the chart above, the price of gold is not always stable against the rise in prices — or inflation.

This doesn’t entirely rule gold out, though! Some studies do suggest that gold can be an effective hedge against inflation over longer time horizons. This is why it is essential to consider gold as a complementary part of a broader, well-diversified investment strategy rather than a standalone solution.

Diversifying with Gold

While gold and other precious metals may not be the most effective safeguard against inflation in every scenario, they can have their place in a well-diversified portfolio.

Diversification is a cornerstone of sound investing. By allocating investments across different asset classes, investors can reduce the overall risk of their portfolio, helping to insulate against unexpected declines in any one particular asset class. Gold, and precious metals more broadly, play an important role in this context because of their low or negative correlation with traditional assets like stocks and bonds.

We’ve seen this in periods of economic stress or financial market downturns, when gold prices often move in the opposite direction of other assets. 

For example, during the global financial crisis of 2008, stock markets plummeted, but gold prices surged as investors sought safety in a reliable store of value. While you shouldn’t bet on gold to grow your portfolio, it can act as insurance to cushion your assets from inevitable changes in the market.

While gold will not provide you with dividend income — or any real economic use for that matter — it can potentially benefit your portfolio through price appreciation. As investors gravitate to gold in periods of economic uncertainty, the gold in your portfolio can become much more attractive. 

What About Gold Prices in 2024?

Gold prices in 2024 have experienced considerable growth. In fact, since the start of the year, gold prices in 2024 have gone up by a whopping 25%, breaking numerous price records in the process!

People have even been buying gold bars at Costco, causing them to fly off the shelf — WOW.

Many investors are interested in purchasing gold to cash in on the potential for higher prices in the future. With prices projected by some to continue growing into 2025, and gold’s history of being effective at storing value, gold is seen as an excellent shorter-term and longer-term investment for many investors right now. 

While individual investors are seeking gold investments to help protect their wealth and shield them from inflation, central banks globally are increasing their gold reserves, further driving demand for the precious metal.

This rise in its nominal price highlights gold’s reputation as a safe-haven asset, helping to solidify its place in a diversified investment strategy.

How Can I Add Gold to My Portfolio?

If you’re looking to add gold to your own portfolio, you have a few options as an investor, especially in the digital age.

Physical Gold

The most typical way to acquire gold is by buying the physical metal, or buying gold bars. Buying physical gold in the form of bullion, coins, or bars is the most direct way to invest. This provides tangible ownership and removes counterparty risk. 

You want to keep in mind that storing physical gold safely can be a challenge, and selling large amounts of gold may be difficult without the right buyer, so buying gold bars isn’t always the most practical choice for investors.

Gold ETFs (Exchange-Traded Funds)

For a simpler and more liquid investment, many investors turn to gold ETFs, with GLD and IAU being the two most popular. 

These exchange-traded funds track the price of gold and are traded like stocks, offering a low-cost way to invest in the metal without needing to store it. If you’re looking to start investing in gold, ETFs are convenient, but they come with management fees, and investors do not have direct ownership of the actual metal.

Gold Mining Stocks and Mutual Funds

Investors looking for exposure to gold often turn to mining stocks or mutual funds that invest in gold mining companies. These investments tend to move with the price of gold, but they also introduce additional risks, such as operational challenges or geopolitical factors affecting mining companies.

This approach can offer higher returns, but the volatility can also be higher, making it important to assess your risk tolerance before diving in. In the wrong environment, these stocks can feel more like a trick than a treasure, so you don’t want to start adding gold mining stocks to your portfolio without consulting a trusted financial advisor.

Digital Gold Platforms and Gold Options

Digital gold platforms offer a convenient way to invest in gold without physically holding it. Through online accounts, investors can buy, sell, and store fractional amounts of gold, making it accessible to a broader audience. 

These platforms provide flexibility, allowing users to trade gold at any time, and they typically include secure storage options. One key advantage is the ability to invest with smaller amounts of money compared to purchasing physical gold. 

If digital gold platforms seem like the way to go for you, you have to also consider fees for storage and transaction charges that may apply. Investors also must trust the platform’s solvency and security if they choose to invest this way. Despite these risks, however, digital gold is gaining popularity in today’s digital era.

You can also consider gold futures and options, which allow you to speculate on gold’s price without owning the physical metal.

Futures contracts involve agreeing to buy or sell gold at a set price on a future date, offering profit potential but also carrying high risk. Options contracts, on the other hand, give investors the right — but NOT the obligation — to buy or sell gold at a specific price, providing a less risky way to bet on price movements. 

Both strategies can generate significant returns but are complex, oftentimes speculative, and best suited for experienced investors who already understand gold market volatility.

Should I Invest in Gold?

While gold is very popular right now, and has historically been used as a hedge against market volatility and inflation, investing in gold comes down to your unique preferences and circumstances, and does not come without risks.

Risks of Buying Gold

Gold does not generate income, such as dividends or interest, which can make it less attractive during bull markets. Its value can also be volatile since it is influenced by factors like currency fluctuations, geopolitical events, and changes in supply and demand.

Over-allocating to gold can limit your portfolio’s growth potential, so a balanced approach is key. Investing in gold works best when it plays a supporting role in a broader, well-diversified investment strategy.

How Much Gold Should I Buy?

Some financial experts recommend that gold should make up around 5-10% of a well-diversified portfolio, as this allocation is typically enough to enjoy the benefits of diversification without overexposing your portfolio to the risks associated with precious metals. The right allocation mix for you is an important conversation that you should have with your financial advisor.

It is also advisable to rebalance your portfolio regularly. As the price of gold fluctuates, your portfolio’s allocation may drift from your target. Rebalancing ensures that you maintain the proper mix of assets and don’t allow your gold holdings to dominate the rest of your portfolio.

The Future of Gold Prices

The future performance of gold and other precious metals will depend on a variety of factors. Rising interest rates could weigh on gold prices, while ongoing inflation concerns, geopolitical tensions, and central bank policies may continue to support the growing demand for gold as a hedge.

Meanwhile, advancements in technology and industrial demand for metals like silver, platinum, and palladium may drive long-term growth in these markets. 

Let’s Help You Decide!

Towerpoint Wealth is a leading fiduciary wealth management advisory firm located in Sacramento, CA. We help our clients develop a customized plan to make informed financial and investment decisions that align with their preferences, unique personal situations, and longer-term financial goals. 

We believe in helping you remove the hassle of properly coordinating all of your financial affairs, so you can live a happier life and enjoy retirement. 

If you’re considering adding gold to your investment strategy, or have any other questions regarding your wealth management, we encourage you to schedule an initial 20-minute “Ask Anything” discovery call with us!

Joseph Eschleman
Certified Investment Management Analyst, CIMA^®

Jonathan W. LaTurner
Wealth Advisor

Steve Pitchford
CPA, Certified Financial Planner^®

Lori A. Heppner
Director of Operations

Nathan P. Billigmeier
Director of Research and Analytics

Michelle Venezia
Client Service Specialist

Luis Barrera
Marketing Specialist

 Megan M. Miller, EA
Associate Wealth Advisor

 Connect with Towerpoint Wealth, your Sacramento Financial Advisor, on any of these platforms, and send us a message to share your preferred charity.

We will happily donate $10 to it!

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Future-Proofing YOUR Wealth: TPW’s Key Takeaways from the FutureProof 2024 Wealth Management Festival!

At Towerpoint Wealth, a cornerstone of our firm’s philosophy is continued professional development, growth, and innovation, and keeping our professional saw sharp.

In that spirit, and in the interest of ensuring that we are delivering the highest level of counsel, planning, and service, we were excited to send our Partner, Wealth Advisor, Jonathan LaTurner, and our Director of Research and Operations, Nathan Billigmeier to this year’s 2024 FutureProof Festival in Huntington Beach, CA, the world’s LARGEST wealth management festival.

This event brings together leading voices in finance, investing, technology, creative arts, sustainability, and wealth management, offering a unique platform for innovation and collaboration amongst all attendees.

With 4,400+ attendees, 33,000 one-to-one “Breakthru” meetings, 100 peer group discussions, over 50 Breakthru Experiences, and an estimated $22 trillion in total assets under management by all attendees, FutureProof 2024 was truly one for the books!

Now that the festival has concluded and Jon and Nathan are back with us here in Sacramento, we’re excited to share the key takeaways and innovations they brought back and outline how TPW will be implementing certain ideas to help us improve not only the operations of our firm, but also the planning, counsel, service, and guidance we provide to you.

What is the FutureProof Festival?

The FutureProof Festival is a wealth management festival — yes, a wealth management FESTIVAL — the brainchild of Barry Ritholtz. FutureProof stands out from traditional financial conferences in many ways, setting a new standard for how wealth management professionals engage, learn, and network. 

FutureProof is a top-tier event…er…festival for wealth advisors, economists, and independent wealth management firms. Unlike stodgy conventional conferences that often consist of large formal presentations, buttoned-up panel discussions, and impersonal lectures, the FutureProof Festival emphasizes hands-on learning and dynamic interaction. The four-day festival was founded to:

1. Help advisors answer their most pressing questions about the future of wealth management.
2. Learn about innovative ideas focused on firm-building and operations, client collaboration, and investment and portfolio construction and management.
3. Leverage technology for better client service and outcomes: A significant theme was the integration of AI and other technologies to improve the client experience. Tools like Finny AI and other WealthTech solutions showcased how advisors can optimize their service offerings by streamlining client interactions, improving follow-ups, and personalizing advice based on real-time data.

As Ritholtz highlighted, the FutureProof Festival represents the future of financial conferences, with a focus on collaboration, hands-on learning, and real-time problem-solving over passive listening, making it a transformative experience for advisors looking to elevate their practice, and for principals to elevate their wealth management firms.

One of the most unique aspects was the inclusion of engaging exercises, such as “corporate speed-dating” called Breakthru meetings, where advisors had the opportunity to rub shoulders with industry experts and innovators in short, focused, one-on-one sessions. 

These Breakthru meetings are designed to foster more meaningful conversations, allowing participants to quickly exchange ideas, build relationships, and explore collaborations in an engaging and efficient manner.

Another standout feature was the festival’s “Level Up” series, a curated set of workshops designed to give advisors new skills and deepen their expertise. These sessions were interactive and practical, offering real-world applications that advisors could immediately implement in their practices. 

Whether learning about advanced financial planning techniques or honing client relationship strategies, attendees walked away with actionable insights to elevate their advisory services.

The broad array of speakers also set the FutureProof Festival apart from traditional events. The festival brought together thought leaders not only from the financial industry but also from technology, impact investing, and creative fields, creating a truly interdisciplinary experience: 

• Jill Schlesinger, Host, Jill on Money, CBS Mornings
• Saira Malik, Chief Investment Officer, Nuveen
• Ben Johnson, Head of Client Solutions, Asset Management, Morningstar
• Jeffrey Gundlach, CEO & CIO, DoubLine Capital
• Dominic Chu, Senior Markets Correspondent, CNBC

This diverse speaker lineup allowed for a broader perspective on wealth management, helping advisors to think outside the box and approach client challenges with fresh, innovative solutions. 

Hot Topics from FutureProof ‘24

Every interactive session at FutureProof 2024 delved into the most critical and pressing topics for the future of wealth management, each designed to equip attendees with insights and tools to better serve their clients and grow as a firm.

If you’re curious, here is the full agenda, and below are some of Jonathan and Nathan’s favorite sessions:

Future-Proofing Businesses

It’s in the name! One of the central focuses at FutureProof 2024 was ensuring that wealth management firms are truly “future-proof,” exploring what the wealth management firm of tomorrow will look like and how to lead the charge toward that future in this ever-evolving industry. 

Through the workshops and speaker sessions, attendees learned about the technologies and trends that are reshaping the financial landscape, including advancements in automation, data analytics, and client experience platforms. We also learned actionable steps to prepare for the future and stay competitive in the wealth management arena.

By staying ahead of these changes, at TPW we are better equipped to anticipate changes in client expectations and industry demands. The emphasis was on adopting innovative tools without losing sight of our core mission:  Helping you remove the hassle of properly coordinating all of your financial affairs, so you can live a happier life and enjoy retirement.

Harnessing AI: Maximizing Innovation, Minimizing Risk

Another spotlight was on the transformative potential of artificial intelligence (AI) in the world of wealth management.

The sessions on harnessing AI taught our advisors how this technology can enhance efficiency, improve decision-making, and offer more personalized services to clients. They explored practical applications like automating routine tasks, analyzing large amounts of financial data, leveraging ChatGPT, and creating customized investment strategies.

Above all, FutureProof also touched on the risks of over-reliance on AI tools, stressing the need for a balanced approach that combines technological innovation with the human element that is so crucial to personalized financial and wealth planning.

Innovative Portfolio Management

The future of portfolio management was also a hot topic, with advisors exploring emerging strategies designed to enhance portfolio performance, reduce risk, and minimize income taxes. 

With the financial markets constantly evolving, advisors must stay ahead of trends and consistently review and enhance their portfolio management strategies. The sessions underscored the need to consistently evaluate portfolios, ensuring they evolve with market conditions while staying aligned with client goals.

By incorporating these insights, Towerpoint Wealth can continue delivering diversified, top-tier advice to create portfolios that anticipate market shifts and exceed client expectations.

Driving Firm Culture and Leadership

Finally, the festival highlighted the importance of building and maintaining a strong firm culture as wealth management firms like Towerpoint Wealth grow with our clients.  

As firms grow, so does the need for strong leadership and a cohesive culture. FutureProof incorporated sessions focused on the transition from advisor to CEO, offering insights on how to lead a firm through growth while keeping the team motivated and aligned with the firm’s mission. Wealth advisors and principals left FutureProof 2024 with strategies for cultivating a forward-thinking, client-centered culture, even as the firm expands.

Through these diverse sessions, Jonathan and Nathan brought back invaluable knowledge that will not only benefit our firm, but also enhance the services we provide to you as our client. Each session provided fresh perspectives and actionable strategies, ensuring that we stay at the forefront of the wealth management industry.

How was FutureProof Festival 2024 Different from FutureProof 2023?

As you may know, Towerpoint Wealth was fortunate enough to attend FutureProof in 2023 last year, with our President, Joseph Eschleman, in attendance with Jonathan and Nathan. 

FutureProof 2024 stood out as a monumental year for the festival, with a 67% increase in attendance from 2023!

We feel that this year’s event fostered more opportunities for networking and organic growth than in previous years, allowing for an even MORE dynamic experience. This year’s iteration also offered many more insights on the development of technology in the wealth management industry that can help advisors to better achieve their growth initiatives and, more notably, serve their clients.

Our Top Takeaways from FutureProof Festival 2024

Though there have been many takeaways from this year’s FutureProof festival, we found that the most useful information gained from the conference was insight into RIA industry trends, the market landscape, and where the RIA industry is headed.

One standout presentation, from Michael Kitces, co-founder of CY Planning Network and Chief Financial Planning Nerd for Kitces.com, provided detailed information to help us understand how TPW measures up against other regional firms. 

We also enjoyed the sessions with SS&C about client relationship management (CRM) systems that help us provide better and more coordinated communication and service to our clients. Another standout meeting was T. Rowe Price’s meetings about current ETF trends, which provided insightful commentary on trends and their effect on client portfolios.

The interactive format made the session engaging and informative, offering valuable insights into the firm’s positioning within the industry. It was reassuring to see that TPW is taking all the right steps to ensure we’re equipped to meet our clients’ complex needs, positioning us as a leader in the competitive financial landscape.

The sessions also included some valuable information about the ever-changing industry of financial technology, or FinTech. These sessions provided us with even more confidence in the TPW’s ability to source, vet, and implement technology-based solutions, allowing us to utilize the best available technology to operate our Firm and serve our clients.

Overall, FutureProof is a great event and continues to be a great conference to attend. We look forward to attending the years to come.

Final Thoughts

2024’s FutureProof Festival proved to be an educational, enlightening, and flat-out fun experience for Towerpoint Wealth!

From the innovative and engaging sessions at the festival, we were able to learn about groundbreaking advancements in AI, innovative portfolio strategies, leadership development, and firm culture. The festival offered actionable insights that we can’t wait to bring back to our clients.

The wealth management landscape is evolving and innovating, and we’re excited to evolve and innovate with it. With the knowledge gained at FutureProof, TPW is more prepared than ever to navigate the road ahead, always with your best interests in mind.

Our advisors didn’t just attend FutureProof to learn — they went to bring those insights back to you. By attending FutureProof 2024, our team at Towerpoint Wealth is returning energized and ready to implement these innovative strategies, ensuring that we continue to lead the way in the wealth management industry while staying laser-focused on what matters most — our clients.

We encourage you to schedule an initial 20-minute “Ask Anything” discovery call with us!

Joseph Eschleman
Certified Investment Management Analyst, CIMA^®

Jonathan W. LaTurner
Wealth Advisor

Steve Pitchford
CPA, Certified Financial Planner^®

Lori A. Heppner
Director of Operations

Nathan P. Billigmeier
Director of Research and Analytics

Michelle Venezia
Client Service Specialist

Luis Barrera
Marketing Specialist

 Megan M. Miller, EA
Associate Wealth Advisor

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