The comparative tax burdens between the United States and several other advanced economies. The central message highlights that the U.S. has a significantly lower tax burden, with total tax revenue constituting 27% of its Gross Domestic Product (GDP). This figure is notably lower than the tax revenue percentages of other major economies such as France (45%), Germany (40%), and Italy (43%).
The lower tax revenue as a percentage of GDP in the U.S. suggests a relatively lighter tax load on its economy compared to these nations. This can impact the level and scope of public services and infrastructure the government can provide. Countries with higher tax revenues often fund extensive social welfare programs, healthcare, and other public services, reflecting their socio-economic policy choices. In contrast, the U.S. tends to rely more on private and state-level initiatives for services that other countries might provide at a national level through higher taxation. This comparison underscores the diversity in economic policy approaches among advanced economies, each balancing taxation, public service provision, and economic growth differently.
If you are concerned about how your tax burden affects your financial future and wealth growth, it’s essential to understand your options and plan strategically. Contact us today to set up an initial analysis. Our experts can help you assess your current tax situation, explore strategies to minimize your tax liabilities, and align your financial planning with your long-term goals. Don’t let uncertainty about taxes hinder your financial growth—reach out now for tailored advice and proactive solutions.
Compensation packages for directors, VPs, software engineers, or other employees of technology based firms almost always contain restricted stock units, or RSUs. If you own RSUs, you may be asking one or more of the most common questions about RSUs:
Maximize stock compensation | RSUs in your compensation package can become a substantial part of your overall net worth.
Maximize stock compensation and RSU selling strategy
RSUs, also commonly known as restricted stock units, are a form of stock compensation, whereby an employee receives the right to own shares of stock in the company they work for, subject to certain restrictions. Initially, these units do not represent actual ownership, however, once the restrictions are lifted and your RSUs vest, the units convert into actual company stock, and you, the employee, then have vested stock – you own the shares outright.
The “restricted” in RSUs is generally based on a vesting schedule. Most vesting schedules will fall into one of two categories: Time based or performance based.
When most people think of stock compensation they typically think of vested stock OPTIONS, or the right to buy a company’s stock at some future date, but at a price established TODAY.
RSUs are taxed when the restriction lifts, at which time shares vest and become part of an employee’s taxable income, taxed at the fair market value of the total amount of shares that vested. The taxation of restricted stock units is identical to normal wage income, included on an employee’s W-2.
The shares of vested stock are subject to federal, state, and local income taxes, as well as Social Security and Medicare taxes.
When an employee sells their vested stock, they will pay capital gains tax on any appreciation over the market price of the shares on the date of vesting. If the shares are held longer than one year after vesting before being sold, the sales proceeds will be taxed at the more favorable long-term capital-gains rates.
RSU selling strategy to mitigate the tax burden | RSU tax selling strategy
While you must pay ordinary income taxes when your RSUs vest, and also must pay capital gains taxes upon selling appreciated RSUs, you can mitigate the tax burden. Your RSU tax selling strategy could include targeted charitable giving, utilizing capital losses to offset capital gains, and outright gifting of vested shares are three ways.
When can RSUs have a negative effect on your net worth? Does your RSU selling strategy grow net worth?
While restricted stock units complement a traditional compensation package, and can contribute to your net worth, there are risks involved in managing RSUs.
The primary risk is that you have too much of your net worth concentrated in one individual stock, and one individual company.
We serve clients primarily in the Northern California region. Glad you’re here! Please contact us with any questions you have about our wealth management process.
4 Reasons You Might Fall Short of Your Retirement Plan
When you find yourself daydreaming about retirement, does your dream retirement entail traveling the world? Dedicating time to beloved hobbies? Helping your children and grandchildren? Will you have enough money to retire this way? Dreams like these can become your reality, but numerous planning mistakes often cause retirement plans to fall short.
Everyone deserves a great retirement, but prudent planning and saving enough for the lifestyle you aspire to are critical to making it possible.
According to recent studies, retirement savings look grim for many Americans. One survey showed that just 24% of Americans feel like their savings are on-track for retirement, and 20% don’t have any retirement savings at all. The 2024 Northwestern Mutual Planning & Progress Study showed that there are large gaps between what people think they’ll need to retire and what they’ve saved. Financial planners recommend investing at least 10-15% of your income in a retirement account to be on track.
If you have started saving for retirement, you are definitely ahead of the curve. But don’t rest on your laurels just yet: You may still be engaging in some of the most common retirement planning mistakes without even realizing it. Here are four retirement planning mistakes to avoid:
Four Retirement Planning Mistakes to Avoid
Mistake #1: Not Saving Consistently
Most people are not saving as much as they need in order to maintain their current lifestyle in retirement. One of the worst retirement mistakes to avoid is saving too little now and hoping to “catch up” in the future. The truth is, catching up rarely happens and unexpected life circumstances can make doing so nearly impossible.
To save more: create a budget, cut out unnecessary spending, open a retirement plan, such as a 401(k) through your employer, or an individual retirement fund as a self-employed individual, and save extra money with each raise or bonus you receive from work.
Mistake #2: Focusing on the Return Rate
If you have an investment that produces a high rate of return, it is easy to get caught up in always
Rather than chasing a high rate of return, we recommend shifting your focus to creating a diversified portfolio that spreads out investments through a variety of fund types and asset classes. Working with a financial advisor who helps you diversify and measure and manage the risk of your portfolio can help protect your retirement savings if/when the economy goes sideways.
Mistake #3: Not Factoring Taxes into the Equation
Another common mistake made during retirement planning is not considering taxes and their impact on your savings. In order to maximize retirement success, a retiree will need a plan to efficiently manage taxes in retirement. Consider speaking with a financial advisor regarding the creation and implementation of a tax-efficient retirement strategy.
Mistake #4: Retiring Too Early
Many people approach retirement age and realize they haven’t saved as much as they needed to maintain their current lifestyle (or pursue their dreams) in retirement. If this sounds like your situation, consider staying in the workforce a little longer to further add to your retirement nest egg. (You might ask, is $2 million enough to retire? It might be, but it might not.)
Staying in the workforce longer may also allow you to delay taking your Social Security benefits, allowing your eventual Social Security guaranteed income stream to continue to grow. (Note: Social Security data shows that around 33% of retirees live until 92 years old, yet 75% of retirees apply for benefits as soon as they hit 62).
Of course, pushing back retirement is not always the best or most attractive option for everyone. Health issues or other life circumstances may encourage an early retirement.
Whether you plan to retire early or need to retire later than expected, working with a financial advisor can help you determine the best way to prepare yourself for your specific retirement needs.
We Are Here To Help
Want to avoid other retirement saving mistakes and create a personalized, comprehensive retirement plan? Please call (916-405-9140) or email us (info@towerpointwealth.com) for a complementary consultation.
Understanding that the world of investing and wealth-building is filled with opportunity, not only for growth but also for errors, at Towerpoint Wealth we believe our role is to raise awareness and help our clients and friends avoid investing mistakes as they work to build and growth their net worth and move toward a more prosperous financial future.
To that end, we’ve created a special four-part educational video series, focusing on 20 of the most common investing mistakes to watch out for, as identified by the CFA Institute.
Are you aware of, or even making, any of these common investing mistakes?
In this, our first video of the series, we look at the first five investing mistakes people make and answer these questions:
How can we manage having impractical expectations?
What does it mean to have a shorter-term focus?
What is performance blindness?
What’s the best way to react (or not react) to bad news?
And, what exactly does emotional investing mean?
20 Common Investing Mistakes – Part 1
Like taking a penalty in hockey or a personal foul in basketball, building and protecting net worth requires avoiding mistakes as much as it requires careful consideration, discipline, guts, strategic planning, and sometimes even a little luck. In the second video of our series on the 20 most common investing mistakes to avoid, we focus primarily on risk management.
20 Common Investing Mistakes – Part 2
Since committing common investing mistakes can directly interfere with getting your money’s best performance, part three of our four-part series focuses on five investing mistakes we know we shouldn’t make, but sometimes do anyway.
In our final video of the series, Joseph Eschleman, answers these questions:
What does it mean to do a portfolio checkup?
How regularly should you do a portfolio checkup?
Why is it important to account for inflation within your investment portfolio?
Why in the world would an investor buy high and sell low?
What can be consistently controlled within your financial and investment plan?
20 Common Investing Mistakes – Part 4
If you would like to discuss your financial portfolio, how we help clients build and protect their net worth, or learn more from our wealth management firm’s white papers, blog posts, and educational videos, click below.
Compare Treasury bill —T-bill— rates with bank CD best rates. T-bill rates today are often as competitive, and oftentimes more competitive, than the interest rates offered on CDs. But this is only one reason why, if you’re looking head-to-head at T-bills or CDs, Treasury Bills may be a superior safe investment.
Let’s look closely at T-bill yields and three other reasons why Treasury bills—short-term government bonds issued by the US Department of the Treasury—often emerge as the superior choice over Certificates of Deposit, or CDs.
Primarily, T-bills almost always carry virtually all of the benefits of CDs with a number of additional features and economic benefits—including tax benefits.
Taxes: Who wins, T-bills or CDs?
T-Bills Carry Tax Benefits
The interest income from T-bills, while still taxable at the federal level, is exempt from state and local taxes, presenting a notable advantage for investors in states with moderate-to-high state and local income taxes.
This state and local tax exemption enhances the after-tax yield of T-bills—the money you get to keep—and helps to contribute to more efficient returns on investment (ROI).
Conversely, the interest paid by CDs is fully taxable at the federal, state, AND local level, potentially reducing the net returns for investors. The tax-favored treatment of T-bill interest enhances their appeal as a tax-efficient investment, particularly for those seeking to optimize their returns while minimizing tax liabilities.
Liquidity: Who wins, T-bills or CDs?
T-Bills Have Exceptional Liquidity
Treasury bills are renowned for their exceptional liquidity in the financial markets. They are easily bought and sold, and offer distinct liquidity advantages over CDs.
As short-term bonds issued by the US Treasury, T-bills are actively traded in the secondary markets, enabling investors to easily buy or sell them—if they want—at prevailing market prices, even before their maturity.
This dynamic secondary market presence provides a high degree of liquidity, enabling investors to swiftly convert T-bills into cash without incurring significant transaction costs.
On the other hand, while CDs offer some liquidity, they often come with significant penalties for early withdrawals. T-bills carry no such penalties.
Safety and Risk: Who wins, T-bills or CDs?
T-Bills are Extremely Safe Investments
While we think of CDs as being the safest investment, Treasury bills hold a distinct advantage over certificates of deposit when considering safety and risk. T-bills are issued by the US Department of Treasury, and are backed by the full faith and credit of the US government. This government guarantee makes T-bills virtually risk-free, as, despite periodic political noise, the likelihood of US default is exceedingly low. This level of security provides investors with a safe haven for their capital, particularly during uncertain economic times. Conversely, CDs offered by banks are subject to the credit risk of the issuing bank, and as we know, it’s not unheard of for banks to fail.
T-Bills Have No FDIC Insurance Limits
With a bank CD, FDIC insurance limits are relatively low ($250,000 per depositor, per FDIC-insured bank, per ownership category), especially when compared to the limit-free US government insurance that T-bills provide.
Money earned: Who wins, T-bills or CDs?
T-Bill Yields are Often More Competitive
T-bill yields are often as competitive, and oftentimes more competitive, than the interest rates offered on CDs with comparable maturities, especially during periods of economic uncertainty or when interest rates are low. Take a look at T-bill rates today, compared with bank CD best rates, and see for yourself.
Though it might look like there is a clear-cut winner here, truth is, there are a lot of moving parts, and it’s important to consider all the elements involved. Before making any changes to your investment strategy, it’s a good idea to reach out to a certified, independent financial planner. One that is a fiduciary, that is—legally bound to act 100% in your best interests. All your life you’ve been working so hard for your money. It’s time to get THAT money to work for you.
Empower yourself with this strategy for financial independence, early retirement, and peace of mind.
More than a hot trend, FIRE investing principles have been guiding wealthy, independent people towards financial independence and early retirement for many decades. Implementing the Financial Independence Retire Early strategy takes discipline and commitment.
In this video, Towerpoint Wealth’s President, Joseph Eschleman, lays out the basics of this financial strategy. Click on the video image below to watch the video.
Consider: are you optimizing your lifestyle? Are you saving aggressively? Are you investing strategically? Will you be able to maintain a sustainable withdrawal rate post-retirement? These are essential pieces of the financial independence early retirement (FIRE) financial strategy.
Developing a customized financial and wealth management plan and strategy now will help you advance towards your personal and financial goals, grow net worth, and ultimately help you retire on your schedule. Time is money. Partnering with an advisor that understands you means you may spend less time worrying about this aspect of your life.
Are you curious about whether a FIRE investment strategy could work for you? Towerpoint Wealth serves clients primarily in the Northern California region with an annual household income exceeding $250,000. Please contact us with any questions you have about our wealth management process.
A 2020 survey from Schwab Retirement Plan Servicesfound that the average worker expects to need roughly $1.9 million to retire comfortably. Is $2 million enough to retire? Is retiring with 2 million dollars a reasonable goal? There certainly are a myriad of moving parts involved in answering the question of whether retiring with 2 million is enough, and a number of things to consider.
Is $2 million enough to retire if you plan to live off interest alone? Is $2 million enough to retire if you plan to embark on expensive hobbies? Where you will live, and how? What will you need to cover health costs? These are just some of the financial complexities when you consider retirement.
Whatever the number you settle on as “enough,” click below for five steps you can take immediately to build and protect your net worth.
Are you looking for a high quality financial advisor? There are literally thousands of people who hold themselves out as financial advisors just in California alone. How can you possibly figure out who is right for you? What questions to ask when hiring a financial advisor.
Don’t be overwhelmed in your search hiring a financial advisor or wealth manager. Just start with six important questions to make sure they are the best fit for you, your life, and your financial situation.
Hiring a financial advisor shouldn’t totally stress you out. But you know the benefits of hiring a financial advisor, and your financial future is serious business. They need to have your best interests front and center. This is the definition of fiduciary.
Six questions to ask when hiring a financial advisor
How do you know you are talking with a high quality financial advisor?
Trust
Do you trust them with not only the personal details of your financial accounts but also with the personal details of your life? A high quality financial advisor engenders trust.
Experience
Do they have a history of successful performance and a network of happy clientele who are willing to step forward and vouch for their professionalism and knowledge? A high quality financial advisor has experience.
Fiduciary Standard of Care
Are they legally bound to serve in your best interests? The definition of fiduciary is that they aren’t beholden to the company that employs them or to a service provider (such as an insurance company) in order to earn an income. A high quality financial advisor acts as a fiduciary.
Finding out whether a financial advisor has these basic three requirements—trust, experience, a responsibility of fiduciary care—are the reasons for asking a potential financial advisor the six questions. Questions 1 and 2 speak to their experience and trustworthiness. Questions 3 and 4 speak to whether they will 100% of the time be acting in your best interests rather than their own—that they meet the definition of fiduciary. Questions 5 and 6 assure that the services they provide match your needs and your philosophies.
Here are the six questions to ask when hiring a financial advisor
1. What is your education and experience? 2. Do you have any compliance or regulatory infractions? 3. Are you required by law to operate within a fiduciary or suitability standard of care? 4. How exactly are you compensated? 5. Do you provide comprehensive financial plans? 6. What is your financial planning and investment philosophy?
If the advisor you’re interviewing doesn’t answer these six questions in an articulate way, you may want to continue your search.
What does a financial manager do? Helps you better manage and coordinate your financial affairs, obviously. Breaking this down, the point of finding a fiduciary financial advisor with experience, and who you trust will be a good partner for you increases your odds of successfully growing and protecting your net worth and assets over time, especially these days with how unsettled the markets, economy, and politics all continue to be.
If you’re looking for a new financial advisor—even if you’re currently working with one—asking them these six questions to ask when hiring a financial advisor, and doing your due diligence to assure they’re answering truthfully, will help you ensure you’ve got the right financial advisory partner on board.
Are you considering hiring a financial advisor? Do you think that our Sacramento wealth management firm might be a good fit? Please, use this link to set up a no-obligation consultation.
Most investors know, exposure to real estate in a financial portfolio provides opportunities to grow net worth. In America, there are basically two tax systems: one for those in the know, and one for those not in the know. What you don’t know CAN hurt you.
Towerpoint Wealth Management Joseph Eschleman and Associate Wealth Advisor Megan M. Miller recently presented “The 9 Tax Planning Secrets Real Estate Investors Wish They Had Known” to the West Sacramento Real Estate Investment Meet Up group. Here is a recap of the presentation, and the nine tax tips for real estate investors.
Would you like to discuss your specific scenario with us?
Are income taxes dragging you and your portfolio down, and at the same time reducing your real overall return?
Do you know how much you are paying in fees and investment expenses?
As an investor, what exactly are you supposed to do to reduce and manage expenses and income taxes? They are unavoidable, and will always be part of your net worth building journey.
However, there is definitely good news – both of these necessary evils of investing are controllable, they are minimizable, and there are strategies to help you reduce them.
In this video Joseph Eschleman, President of Towerpoint Wealth, a boutique Sacramento Wealth Management firm, explains nine specific ways to keep expenses and income taxes in check, including:
Five strategies to minimize the impact of income taxes on your portfolio
Four strategies to keep more of your money working for you
