The Stock Market Just Dropped Over 1100 Points. What Should I Do?????

The stock market has been in the news a lot lately, but the story flipped in the last few days.  Since late 2016, media reports have practically been gushing about new market highs and how each 1,000 point gain in the Dow Jones Industrial Average has been faster than any previous 1,000 point gain in history.  Then, there were two sharp declines last week, followed by a decline of 1,175 points today – the largest one-day point drop in history.

At this point, it is perfectly logical to be asking, “What does this mean and what should I do about it?”  If you are invested in the stock market, especially in a retirement plan, the ups and downs are unsettling.  This is money you need for real things – money to fund a secure retirement, college educations for children, or a new house.  While the upside surges may be encouraging, the sudden shift to a drop is unsettling.

The first thing we want to point out is that this happens.  While the point drop on Monday was severe, the 4.6% drop in the Dow and 4.1% drop in the Standard and Poor’s 500 (the index that probably matters more to your retirement plan results) aren’t that uncommon.  There was a much larger single day drop in August 2011 – 5.6% on the Dow and 6.7% on the S&P.  The point drop that day wasn’t as high as this week because the indices have increased more than 100% in the 6-1/2 years since then.   So that drop wasn’t a sign of impending doom.

But sometimes a bad day is a sign of a larger, longer market decline.  The large single-day declines in the fall of 1929 and the fall of 2008 were signs that the stock market was in real trouble and were followed by further losses as the economy unraveled.  Many models of stock market valuation have been indicating that stock prices are historically high, so this could be the start of a real shift in market prices and a real decline in stock prices of 20% or more.

If that is true, then what should you do?

The first question to answer is whether you have an asset allocation plan.  What is that?  It is a long-term strategy for allocating your money to cash, bonds, and stocks.  This plan should consider your age; ongoing income; the size of your investment portfolio; when you will need money from your investments; and how changes in the value of your investments affect your emotions.  That last point is important.  An asset plan can check all the boxes set by a computer program or an investment advisor, but if it leads to changes in value that leave you unable to sleep then it didn’t work.

If you don’t have an asset allocation plan, now would be a good time to sit down with a financial planner who will help you develop one.  It might have been good to do it before a market decline, but “late” is definitely better than never.   Developing a plan that can work for you can help improve your financial future and prepare for the next shock in the markets – whether that shock is a stock mania or a panic.

If you do have a target asset allocation, that still isn’t a “set and forget” answer.

The first thing you need to do is balance back to that allocation on a regular basis.  If you haven’t been resetting your investment accounts over the last couple of years, you probably own more stocks than the target in your plan even after the declines of the last week.   This would still be a good time to rebalance, so the risk in your investments is back to the level you prefer.  That won’t mean you are immune from stock market declines, but they should lead to losses that don’t derail you from meeting your goals.

And if you recently rebalanced and have less money in stocks than your asset allocation plan indicates, congratulations; you lost less today than you would have.  But don’t count on your timing being this good regularly.  If you want to wait a bit to see how the market settles out before balancing back into stocks, that isn’t a bad idea.  Looking at the long term, being under-allocated to stocks for a few months isn’t a tragedy, since the market goes up more slowly than it goes down.

The other thing to consider about your asset allocation plan is that the targets shouldn’t stay fixed over time.  As you get closer to needing the money in your investments for, well, living, your allocation to safer investments can increase.  The long term return to stocks has been higher than for other investments (including gold, Beanie Babies, and Bitcoin), but stocks can lose a lot of value in a very short time, as we saw again today.  It’s not good to have $1,000 converted to $800 when you will really need the $1,000 in the next couple of years.  Your target allocation may not change between ages 30 and 40, but as you approach retirement, you really should talk with a financial planner about what you need to do to reset your targets to reflect how soon you may need the money.  You may be able to avoid this step if most or all of your investments are in “target date” mutual funds from providers like Vanguard, Fidelity, and others.  These funds should be automatically shifting their target asset allocations as they approach the target retirement date in the fund’s name.

As the ads for financial products say, always talk to your financial advisor before making an investment decision.  If we are your financial advisors, we would be happy to talk with you.  If not, we’d like to be.  Call 513-794-1829 or email to get started.

Jim Iverson, CFA®


Year-End Planning: Emergency Edition ’17

I’ve been trying to write this missive for months.  This is *definitely* not your typical year-end on either the tax or investment fronts.  Congressional leadership has surprised me and most other observers by passing a tax bill with major changes, and we are only now getting enough detail to understand the radical changes that are only weeks off!

The stock market also looks to be turning in a strong performance for 2017.  Many of us fear that it is now overvalued, with implications for both your investment portfolio performance and your 2017 tax returns.

So, here are my thoughts on year-end planning.

Tax Planning:

As of today, it appears that the Congressional Republicans’ tax bill will pass and be signed into law this week.  The way we calculate taxable income will change for the next 8 years!  Your federal taxes may go up, down or sideways.

There have been some calculators out; so far I’ve found them largely meaningless.  I expect to have one available for tax season.  For now, I ran a few random returns with the major changes.  It appears that *most* middle income clients will have higher taxable incomes, but lower net income tax.  Lower income folks *should* see lower taxes.  Some of your taxes will go up!  Contact me to see if yours was one I ran – or I can do that if you ask nicely.

Highlights that bear on planning right now (as in, before year-end):

RATES:  The same number of tax brackets (7), but all over 10% are down about 2-3% (15% bracket is reduced to 12%); some bracket shifts may mean higher rates on part of your income.

EXEMPTIONS:  They are eliminating the personal exemption in 2018.  This could be bad news for anyone with multiple children or other dependents (older kids, parents, etc.).  The increased standard deduction does not cover this loss for anyone except singles.  A small new credit will not either.

ITEMIZED DEDUCTIONS:  They have substantially reduced allowable deductions.  In a blow to residents of the coasts and somewhat to Ohio & Kentucky, state & local tax deductions are limited to a total of $10,000 in income & property tax combined.  See details below.

The standard deduction will not quite double, so not a replacement for the loss of exemptions.

CHILD TAX CREDITS:  There will be an increased child tax credit, but only for children under 17.  Income phase outs will increase, so that’s good news with anyone with kids & income $110,000 – $400,000.

BUSINESS INCOME:  It appears that some of you who are self-employed or freelancing may pay significantly less income tax but the details are complex; for most of you, 20% of your business profit will be exempt from income – not self-employment – tax.

  • PLANNING TIP: It may be worth pushing invoicing off until January to the extent you still can. You can’t avoid reporting it by just not depositing a check.



  • State & local income & property tax deductions will be limited to a $10,000 aggregate total. (If your income taxes are $6,000 and your property tax is $6,000, the deduction will be $10,000.) This will be a mixed bag in Ohio & Kentucky – and bad on the coasts.  The effect will depend on your income & how much property tax you’re paying.
  • Home equity loan interest will no longer be deductible.
  • Unreimbursed *employee* expense deductions will be repealed. Note that this does not affect business deductions, only those employees like salespeople who don’t get reimbursed for mileage, etc.
  • Other Miscellaneous Itemized deductions will all be repealed, including tax preparation fees, legal fees, investment fees, gambling losses, etc.
  • Undoubtedly, some of you may no longer be itemizing deductions, so you’ll see reduced or no tax effect from your taxes & charity in 2018.
      1. Pay your 4th quarter 2017 state & city estimated taxes in December. Pre-paying 2018 is specifically not allowed.
      2. Consider paying at least the first installment of 2018’s property taxes, or all of it. This is not disallowed.
      3. Accelerating 2018 charitable contributions may pay off.
      4. For longer-term planning, if you want to make all your 2018 contributions – and maybe 2019 & beyond, you should consider a charitable donor-advised fund. DAF’s are a type of low-cost trust arrangement that allows you to take the deduction now and actually send the money out later.
      5. Definitely get your noncash charity (Goodwill) out of the house before year-end!

 ALTERNATIVE MINIMUM TAX:  Changed, but not repealed.  You may no longer pay.  Call for details.

 OTHER ISSUES:  Alimony will not be taxable or deductible beginning with 2019 divorces.  Corporate rates, Estate (“death”) tax reduction are also in the bill, but those don’t affect real people we know, so I’m not covering them here.


  • Dependent Care Credits & Flexible Spending
  • Education credits
  • Student loan interest (for those within the income limits)
  • Teacher expense deduction
  • Adoption Assistance (tax free employer reimbursement & credit)
  • Tuition waivers (for University employees, families & grad students)
  • Exclusion of gain from sale of home (still 2 of 5 years)
  • 401(k)’s: There were rumors they might try to restrict or even eliminate pretax contributions


We don’t know how to start changing W-4’s, but will need to do that soon – especially for those of you whose taxes will increase.  Restructuring withholding should be on IRS’s short list.  Correcting yours is on mine.

Oh, and it’s all temporary – to 2025 – except the corporate tax reductions, which are permanent.

Please call if you want to discuss any of this.  If I get useful updates, I’ll post them here.   I’ll also post good links on my business Facebook page.  So watch the news, but pay attention to your sources.  There’s a *lot* of noise out there that just isn’t true either because of deliberate bias, or lack of understanding by those reporting.

Here are a few links to readable, reliable blogs (even then, not gospel; nobody’s read all 1,097 pages yet):




  1. Many actively managed (not index) mutual funds will be reporting large capital gains – which you will need to report as income even though you haven’t sold the fund(s). (The gain should be more-or-less reflected in your current market value.)  A large number of funds will be reporting income of 10% or more of market value and some even 20%+.
  • Those of you with incomes in the lower brackets may pay no tax on these, as the 0% capital gains rate applies.
  • If your income puts you in or above the 25% bracket, you’ll pay 15% on the gains.


  1. The stock market has soared in the past few years, and many of you may be selling to take gains. The above comments about long-term capital gain tax apply.


  1. Please review the risk level in your portfolio. If the market “corrects,” you don’t want to be taking more loss than you can stand!  Call if you want help with that.  We have limited time before year-end (more in January) but should be able to review your investments and suggest a few adjustments.


Looking forward to seeing you all soon – and perhaps hearing from a few of you sooner.  Happy Holidays!

Banking on Student Loan Forgiveness? Do this.

This CNBC Money article has up-to-date advice on how to be sure your forgiveness plan will work:

  1. Make sure you’re in a William D. Ford Direct Loan Program — the key word is “direct.”  You may be able to consolidate other federal loans into a direct loan.
  2. You must be in an income-driven repayment plan.  Graduated & extended plans don’t qualify.
  3. Your employer must qualify: government at any level, 501(c)(3) nonprofits and some others.
  4. Forgiveness is only available after 120 payments, not necessarily consecutively.
  5. Submit the Employment Certification Form annually.  See here.  While not required, it may head off problems.

Call or email if you want to talk about the implications for your personal financial plan!


Has my identity been hacked? What should I do?

The Equifax hack on top of all the others has many of us anxious.  As the internet meme goes “They had one job.”  (They failed.)  Equifax, as a credit reporting agency, held what I call the “ID theft kit,” name, date of birth, Social Security Number, birthdate, driver’s license, addresses current & prior, and credit account numbers.  I have pretty much the same quality of data.  That’s why I’m so careful with my security procedures!

People are asking how to find out if they were affected.  You can ask Equifax on their website or phone, but they’re making up the answers (see media reports).  If it’s 143,000,000+ people, I think it’s reasonable to assume that we all were.  The US population of 300 million includes children, seniors and folks who have no credit records.  The Equifax hack could cover pretty much everybody else.

So, what now?  All your information is out there for sale on the dark web.  A Yahoo! Finance story indicates there’s proof of an uptick in fraud attempts already.

My suggestions:

  • The key step to take now is to put a CREDIT FREEZE on your accounts with Equifax, Experian, TransUnion and CBC Innovis.
    • It’s not free, except at Equifax (for the next 30 days). Expect to pay $5-10 each unless you’re already an ID theft victim or 62+.
    • Keep the PIN you’re assigned in order to remove the freeze or “thaw” it.
    • You will need to thaw in order to apply for credit – a car, a house, a credit card — but it just takes a few minutes. So if you’re shopping right now, hold off, but get back & do it soon.

Equifax: 1-800-685-1111 (3) or

TransUnion: 1-888-909-8872 or

Experian: 1-888-397-3742

Innovis: 1-800-540-2505


  • Equifax has offered “free” ID theft protection for one year, but is taking credit cards for auto renewal. I don’t see a reason to pay them – or to trust them.  I’m skipping it.  You can buy ID theft monitoring from Lifelock or one of the other players, but count me unconvinced. (
  • Check your credit report free at Under federal law, you’re entitled to a report every year from each of the 3 major bureaus.  If you cycle them one every 4 months, you can be on top of it.
  • Then, don’t make it any worse. Practice safe habits yourself:
    • Password protect your computers, cellphones & tablets. Treat them like cash in public; don’t turn your back.  Then take care disposing of them and their stored data when they die.
    • Enable auto update to keep all software updated – especially operating system (eg. Windows) & browsers.
    • Password protect your modem & routers. Don’t use public wi-fi to access secure sites.
    • Use strong (long, complex, random) passwords and use them once. (Try a PW manager:,2817,2407168,00.asp)
    • Maintain anti-virus & anti-malware programs on all devices. (Yes, you might need to pay for that:,2817,2372364,00.asp.)
    • Set your browser to advise you of risky sites & then don’t visit them. Don’t click on pop-ups.
    • Don’t use unsecured email for sensitive information like SS numbers!
    • Never open email attachments unless you know exactly what they are and you’re expecting them from that person. Learn how to check the sender (
    • Use 2-factor authentication (which requires a texted or emailed code) on bank & investment accounts & anything really critical.
    • Back up your files periodically somewhere secure: on an encrypted drive or online.

The Federal Trade Commission (FTC) has lots of good info:

Please feel free to query me about my security procedures. And ask at your doctor’s office and *anywhere* anybody asks for your SS number or anything else sensitive!  I’ve seen incredibly sloppy procedures in the medical and banking fields  — and they have the “ID Theft kit” too.

Be careful out there.



Market’s High — What to Do?

The stock market has posted really strong gains this year; in recent weeks it’s hit all-time highs.  We don’t believe in timing the market, but we do believe in sticking with an asset allocation that’s consistent with our risk tolerance.  Right now, the gains in our stock position (individual stocks & stock mutual funds) have thrown us out of whack – we’re more exposed to the stock market than we like to be.


The coolest thing in rebalancing to a pre-determined asset allocation is that it forces us to sell high and buy low!  Do we always hit the top & the bottom? Of course not.  But we didn’t get creamed in 2008, we stayed in the market without having to sell as it declined, and were forced (by our allocation) to buy near the bottom & ride it up.  Now we’re selling out some of those gains to pull back our stock position and invest in cash like CD’s and in short- to medium-term bonds.

Many of you have expressed interest over the past year in working with us on aspects of your financial plan and the allocation of your investments – including your 401(k), 403(b), 457 or similar plan.

Do you have a plan with Specific, Measurable, Achievable, Results-focused, and Time- bound goals?

  • If you’re under 50, you should be contributing as much as possible to your retirement account(s), you should know how you’re going to pay for kids’ education (if any), and whatever other medium-term SMART goals you have.
  • If you’re 50+, it’s time to start looking at SMART goals for retirement.  How much do you need, when, what you need to do differently in the interim (or maybe continue doing right)?
  • No matter your age, you need an asset allocation that fits your risk tolerance.  At the top of the market is when big losses happen to those who are taking too much risk.  Get a check-up!

Call, email or go to to schedule an appointment.  We do have time to get started while we’re still in Fort Collins, so get in touch soon.  We can get yours started before we meet!  Just ask for a list of items to begin assembling.

Talk to you soon.

Year-End Tax Planning Tips 2016

It’s almost year-end.  Consider some planning opportunities to reduce your tax bill and increase any refund.  Let’s estimate your tax liability in the 4th quarter to best utilize some of these strategies.  If you have income without withholding, 4th quarter payments are due January 15th 2017 to avoid penalties.


  • Make charitable contributions before 12/31: Worthy causes abound!
    • Political contributions are not deductible, but many of your favorite causes may have 501(c)(3) entities that accept deductible contributions in addition to their political or lobbying arm. Watch for “legal defense & education” funds, etc., and the magic language – tax-deductible to the extent allowed by law!
    • Don’t forget that many of your museum, zoo, public TV & radio contributions may be wholly or partially deductible. Find that receipt or email; save the PDF & bring it or upload it to my portal.
    • Use envelopes &/or checks at church, temple or mosque and get the letter! Cash is not deductible, and a cancelled check is not enough for contributions over $250.
    • Check your cell phone bill if you do the $1 or $10 donation texts.
    • Document your volunteer service. Unreimbursed out of pocket expenses and travel/mileage may be deductible; your time is not.  There’s a form on the website at
    • Clear out the closets & basement; call or check the website for a worksheet to value donations.
    • If you’re over 70½ and taking required minimum distributions from IRA’s, the “qualified charitable contribution” has been made permanent. You can contribute directly to a charity from your IRA and not report the income.  For many retired folks, this can provide large savings.  Ask me how.


  • Review your investments. You may be able to take some gains at rates as low as zero percent, or reduce your taxable income by taking up to $3,000 a year in losses.


  • Some home energy credits have been extended through this or beyond. Contact me for details.


  • Timing: Many deductions and credits have income limitations or phaseouts.  And rates have increased the last few years for upper-income taxpayers.  You may lower the tax for one year or both if you:
    • Can defer or accelerate deductible expenses. Making your January mortgage and tax payments in December or paying outstanding medical bills may save tax – or not.
    • This strategy requires some planning, but can work for many people. With itemized deductions, shifting timing can save tax by taking the standard deduction in alternate years.


  • Reduce your tax & save for the future: Boost your 401(k) now, or anytime you get a raise – before you start spending it.  Or open an IRA if you don’t have an employer plan.  If you own a business, retirement plans offer a golden opportunity.  You can do an IRA up until April 15th, but some plans require action before year-end.


  • If you may owe, up your withholding before year-end and avoid underpayment penalties.


Employee Benefits Open Season:  If you still have time & want help determining tax benefits, call!


Post-Election Update:  The incoming administration in DC may result in major tax changes.  It’s possible that rates might go down for you, especially if your income is higher.  If you can push income off into 2017, it might be beneficial.  There have been numerous proposals for tax reform in recent years, but no movement due to the gridlock in Congress.  Some of these proposals could be beneficial.  Stay tuned.

FAFSA Season is Here Again! It’s a good time to think about college if you have kids.

For those of you with children in college or approaching college, the season for filing the Free Application for Federal Student Aid (FAFSA®) is here.  They’ve eliminated the last-minute scramble to file your tax return!  The 2017-2018 FAFSA will use information from your 2015 tax return.

If 1TaxFinancial prepared your 2015 return, we can provide a worksheet that makes completing the form a snap.  If you need one — or help filling out the FAFSA, please call.  The worksheet can also be completed for new clients with your 2015 return.

Note that if your income has changed significantly from the 2015 tax year, we can assist with an appeal for a professional judgment review in the financial aid department.

But even before you need to fill out the FAFSA, there are things to think about in getting financially ready for your child to attend college.  These issues are complicated:  college choice, income, and assets are all factors that determine how much you and your child will be expected to pay.  Now 1TaxFinancial can help with this process.  We have software that can estimate your expected contribution to your student’s education, and provide detailed college-specific information on the colleges your student is considering.  Reports start with the “sticker price” of attending each college and the need-based aid you can expect PLUS college-specific merit scholarships, tuition discounts, and other incentives offered.  These awards and discounts can be substantial and the information difficult for you to collect.  Having the full picture can help you make a better decision on the affordability of the college or colleges you are considering.

If you are a little further away from your student entering college, we can help then, too.  We can help you look at the potential costs and the best ways to save to help pay those costs.  The sooner you start putting money aside, the better your savings can put a dent in those expenses when your child is ready to start college.

Our basic college consulting service starts at $200, including the analysis of one college as discussed above.  Come work with us if your child is 2, 12, 16 or 20, but prime time for the detailed analysis is probably junior year of high school.

Jim Iverson CFA®
Cincinnati, OH 45213
513-794-1829 (o)
513-378-2203 (c)