Seide Financial GroupSteven M. Seide CFP®, AIF®Todd Cottingham, MBAwww.seidefinancial.com110 John Robert Thomas DriveExton, PA 19341610-280-9330sms@seidefinancial.comtwc@seidefinancial.com

June 2019Managing Your Money in a Gig Economy

Charitable Giving After Tax Reform

What's the real return on yourinvestments?

Inflation Variation, Eroding PurchasingPower

Seide Financial GroupStrategies for GenerationsTime for a Mid-Year Investment Check

See disclaimer on final page

Summer is beginning and we hopeyou and your family make the time tobe together and enjoy the longsunny days. This month’s newsletterhas several great reminders. Taxplanning, investment performance,and forecasting for future incomeneeds are central components of ourfinancial planning process. If you orsomeone you know needs a financial“check-up”, we are here to help.

Best,

Dawn, Edwina, Todd, and Steve

Many investors may beinclined to review theirportfolios only when marketshit a rough patch, but carefulplanning is essential in alleconomic climates. Sowhether the markets are upor down, periodically

reviewing your portfolio with your financialprofessional can be an excellent way to keepyour investments on track, and midway throughthe year is a good time for a checkup. Here arethree questions to consider.

1. How have my investments performedso far this year?Review a summary of your portfolio's totalreturn (minus all fees) and compare theperformance of each asset class against arelevant benchmark. For example, for stocks,you might compare performance against theS&P 500 (for domestic large caps), the Russell2000 (for small caps), or the Global Dow (forglobal stocks). For mutual funds, you might usethe Lipper indexes to see how your fundsperformed against a relevant benchmark. (Keepin mind that the performance of an unmanagedindex is not indicative of the performance of anyspecific security; you can't invest directly in anunmanaged index.)

Consider any possible causes of over- orunderperformance in each asset class. If anyresult was concentrated in a single asset classor investment, was that performance consistentwith the asset's typical behavior over time? Orwas recent performance an anomaly that bearswatching or taking action?

In addition, make sure you know the total feesyou are paying (e.g., mutual fund expenseratios, transaction fees), preferably as a dollaramount and not just as a percentage of assets.

2. Do I need to make adjustments?Review your financial goals (e.g., retirement,college, home purchase) and the marketoutlook for the remainder of the year todetermine whether your investment asset mixfor each goal continues to meet your timeframe, risk tolerance, and overall needs. Ofcourse, no one knows exactly what the markets

will do in the future, but by looking at currentconditions and projections for interest rates,inflation, and economic growth, you mightidentify factors that could influence the marketsin the months ahead. With this broaderperspective, you can update your investmentstrategy as needed.

Remember, even if you've chosen anappropriate asset allocation strategy for variousgoals, market forces may have altered your mixwithout any action on your part. For example,maybe your asset allocation preference is 60%stocks and 40% bonds, but now due toinvestment returns your portfolio is 75% stocksand 25% bonds.

To return your asset mix back to its originalallocation, you may want to rebalance yourinvestments. This can be done by sellinginvestments in the overrepresented classes andtransferring the proceeds to theunderrepresented asset classes, or simply bydirecting new contributions into asset classesthat have been outpaced by others until thetarget allocation is reached. Keep in mind thatrebalancing may result in commission costs, aswell as taxes if you sell investments for a profit.

Asset allocation does not guarantee a profit orprotect against loss; it is a method used to helpmanage investment risk.

3. Am I maximizing my tax savings?Taxes can take a bite out of your overallinvestment return. You can't control themarkets, but you can control the accounts youuse to save and invest, as well as the assetsyou hold in those accounts and the timing ofwhen you sell investments. Dividing assetsstrategically among taxable, tax-deferred, andtax-exempt accounts may help reduce theeffect of taxes on your overall portfolio.

In sum, by taking the time to periodically reviewyour portfolio in good economic times as wellas bad, you can feel confident knowing thatyour investing strategy is attuned to currentmarket conditions and your overall needs.

All investing involves risk, including the possibleloss of principal, and there can be no guaranteethat any investing strategy will be successful.

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Managing Your Money in a Gig EconomyAccording to the Bureau of Labor Statistics,16.5 million people rely on contingent oralternative work arrangements for theirincome.1 Often referred to as the "gigeconomy," these nontraditional or contingentwork arrangements include independentcontractors, on-call and temp agency workers,and those who sign up for on-demand laborthrough smartphone apps.

If you are a contingent worker, you need to payclose attention to your finances in order tomake up for any gaps in earnings that mayoccur between jobs. In addition, you'll have toplan ahead for health-care costs, taxes, andsaving for retirement, since you will have toshoulder these expenses on your own. Thefollowing are some tips for managing yourmoney in a gig economy.

Prepare for slower periods betweenjobsWhile establishing a cash reserve is an integralpart of any financial strategy, it is especiallyimportant for contingent workers. You'll want toset aside enough money to cover unexpectedexpenses and large bills that may come dueduring slower months between jobs. A goodstrategy is to make it a habit to deposit aportion of your income in your cash reserve.

Make sure you maintain good creditEven a robust cash reserve might not be ableto weather a significant downturn incontingency work. That's why it's important forcontingent workers to have access to credit tohelp them get through leaner times. Make surethat you maintain a good history by avoidinglate payments on existing loans and paying offyour credit card balances whenever possible.

Come up with a budget...and stick to itBecause your income flow fluctuates, you'llneed to come up with a budget a bit differentlythan someone with a regular income. Your firststep should be to determine your monthlyexpenses. If it helps, you can break them downinto two types of expenses: fixed anddiscretionary. Fixed expenses are expensesthat will not change from month to month, suchas housing, transportation, and student loanpayments. Discretionary expenses areexpenses that are more of a "want" than a"need," such as dining out or going on avacation. Once you come up with a number,you should determine how much income youneed to keep up with all of your expenses.

For a contingent worker, it's especiallyimportant to stick to your budget and keep yourdiscretionary expenses under control. If you are

having trouble keeping on track with yourbudget, consider ways to cut back on spendingor find additional sources of income to make upfor any shortfalls.

Consider your health insurance optionsUnfortunately, as a contingent worker you don'thave access to an employer-sponsored healthplan. However, you do have health insuranceoptions. If you are a recent college graduateand still on your parents' health insurance plan,you usually can stay on until you turn 26. If youare no longer on your parents' plan, you may beeligible for a government-sponsored healthplan, or you can purchase your own planthrough the federal or state-based HealthInsurance Marketplace. For more information,visit healthcare.gov.

Plan ahead for taxesIn a traditional work arrangement, employerstypically withhold taxes from employees'paychecks. As a self-employed worker, you'llhave to plan ahead for federal and possiblystate taxes so you don't end up with a large billduring tax time. The IRS requires self-employedindividuals to make quarterly estimated incometax payments, so make sure you set enoughmoney aside each time you get paid to gotoward your tax payments. Becausecontingency income fluctuates from month tomonth, the IRS allows you to make unequalquarterly payments. In addition, you'll beresponsible for paying a self-employment tax,so you need to account for that as well. Formore information, visit the IRS website atirs.gov.

Don't forget about retirementWhile being self-employed has benefits, it alsocomes with tough challenges. In particular, alack of structured benefits, such as anemployer-sponsored retirement plan, can leadcontingency workers to end up sacrificing theirretirement savings. And even though anyonewith earned income can set up an IRA, thecontribution limits are relatively low — $6,000 in2019 ($7,000 if age 50 or older).

Fortunately, there are some options that mayallow you to make larger retirementcontributions. Consider contributing to a solo orindividual 401(k) plan (up to $56,000 in 2019,not counting catch-up contributions for thoseage 50 and over) or a SEP IRA (25% of yournet earnings, up to $56,000 in 2019).1 U.S. Bureau of Labor Statistics, Contingent andAlternative Arrangements Summary, June 2018

As a contingent worker, youmay be eligible for a numberof tax deductions (e.g.,start-up expenses, mileage),so be sure to keep goodrecords. If you have multiplegig jobs, consider using alog to keep track of yourincome and work expenses.

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Charitable Giving After Tax ReformTax reform changes to the standard deductionand itemized deductions may affect your abilityto obtain an income tax benefit from charitablegiving. Projecting how you'll be affected bythese changes while there's still time to takeaction is important.

Income tax benefit of charitable givingIf you itemize deductions on your federalincome tax return, you can generally deductyour gifts to qualified charities. However, manyitemized deductions have been eliminated orrestricted, and the standard deduction hassubstantially increased. You can generallychoose to take the standard deduction or toitemize deductions. As a result of the changes,far fewer taxpayers will be able to reduce theirtaxes by itemizing deductions.

Taxpayers whose total itemized deductionsother than charitable contributions would beless than the standard deduction (includingadjustments for being blind or age 65 or older)effectively have less of a tax savings incentiveto make charitable gifts. For example, assumethat a married couple, both age 65, have totalitemized deductions (other than charitablecontributions) of $15,000. They would have astandard deduction of $27,000 in 2019. Thecouple would effectively receive no tax savingsfor the first $12,000 of charitable contributionsthey make. Even with a $12,000 charitablededuction, total itemized deductions of $27,000would not exceed their standard deduction.

Taxpayers whose total itemized deductionsother than charitable contributions equal orexceed the standard deduction (includingadjustments for being blind or age 65 or older)generally receive a tax benefit from charitablecontributions equal to the income taxes saved.For example, assume that a married couple,both age 65, have total itemized deductions(other than charitable contributions) of $30,000.They would be entitled to a standard deductionof $27,000 in 2019. If they are in the 24%income tax bracket and make a charitablecontribution of $10,000, they would reduce theirincome taxes by $2,400 ($10,000 charitablededuction x 24% tax rate).

However, the amount of your income taxcharitable deduction may be limited to certainpercentages of your adjusted gross income(AGI). For example, your deduction for gifts ofcash to public charities is generally limited to60% of your AGI for the year, and other gifts tocharity are typically limited to 30% or 20% ofyour AGI. Charitable deductions that exceedthe AGI limits may generally be carried overand deducted over the next five years, subjectto the income percentage limits in those years.

Year-end tax planningWhen making charitable gifts during the year,you should consider them as part of youryear-end tax planning. Typically, you have acertain amount of control over the timing ofincome and expenses. You generally want totime your recognition of income so that it will betaxed at the lowest rate possible, and to timeyour deductible expenses so they can beclaimed in years when you are in a higher taxbracket.

For example, if you expect that you will be in ahigher tax bracket next year, it may makesense to wait and make the charitablecontribution in January so you can take thededuction next year when the deduction resultsin a greater tax benefit. Or you might shift thecharitable contribution, along with otheritemized deductions, into a year when youritemized deductions would be greater than thestandard deduction amount. And if the incomepercentage limits above are a concern in oneyear, you might consider ways to shift incomeinto that year or shift deductions out of thatyear, so that a larger charitable deduction isavailable for that year. A tax professional canhelp you evaluate your individual tax situation.

Qualified charitable distribution (QCD)If you are age 70½ or older, you can maketax-free charitable donations directly from yourIRAs (other than SEP and SIMPLE IRAs) to aqualified charity. The distribution must be onethat would otherwise be taxable to you. Youcan exclude up to $100,000 of these QCDsfrom your gross income each year. And if youfile a joint return, your spouse (if 70½ or older)can exclude an additional $100,000 of QCDs.

You cannot deduct QCDs as a charitablecontribution because the QCD is excluded fromyour gross income. In order to get a tax benefitfrom your charitable contribution without thisspecial rule, you would have to itemizedeductions, and your charitable deduction couldbe limited by the percentage of AGI limitations.QCDs may allow you to claim the standarddeduction and exclude the QCD from income.

QCDs count toward satisfying any requiredminimum distributions (RMDs) that you wouldotherwise have to receive from your IRA, justas if you had received an actual distributionfrom the plan.

Caution: Your QCD cannot be made to aprivate foundation, donor-advised fund, orsupporting organization. Further, the gift cannotbe made in exchange for a charitable giftannuity or to a charitable remainder trust.

Some of the recent changesto the standard deductionand itemized deductionsmay affect your ability toobtain an income tax benefitfrom your charitablecontributions. Incorporatingcharitable giving into youryear-end tax planning maybe even more importantnow. If you are age 70½ orolder and have a traditionalIRA, you may wish toconsider a qualifiedcharitable distribution.

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Seide Financial GroupSteven M. Seide CFP®, AIF®Todd Cottingham, MBAwww.seidefinancial.com110 John Robert Thomas DriveExton, PA 19341610-280-9330sms@seidefinancial.comtwc@seidefinancial.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019

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Inflation Variation, Eroding Purchasing PowerInflation averaged 2.5% for the 30-year period from 1989 to 2018. Although the recent trend isbelow the long-term average, even moderate inflation can reduce purchasing power and cut intothe real return on your investments.

Annual rate of inflation, based on change in the Consumer Price Index

Source: U.S. Bureau of Labor Statistics, 2019 (December year-over-year change in CPI-U)

What's the real return on your investments?As an investor, you probablypay attention to nominalreturn, which is the percentageincrease or decrease in thevalue of an investment over a

given period of time, usually expressed as anannual return. However, to estimate actualincome or growth potential in order to targetfinancial goals — for example, a certain level ofretirement income — it's important to considerthe effects of taxes and inflation. The remainingincrease or decrease is your real return.

Let's say you want to purchase a bank-issuedcertificate of deposit (CD) because you like thelower risk and fixed interest rate that a CD canoffer. Rates on CDs have risen, and you mightfind a two- or three-year CD that offers as muchas 3% interest. That could be appealing, but ifyou're taxed at the 22% federal income tax rate,roughly 0.66% will be gobbled up by federalincome tax on the interest.

That still leaves an interest rate of 2.34%, butyou should consider the purchasing power ofthe interest. Annual inflation was about 2% from2016 to 2018, and the 30-year average was2.5%.1 After factoring in the effect of inflation,the real return on your CD investment could

approach zero and may turn negative if inflationrises. If so, you might lose purchasing powernot only on the interest but also on theprincipal.

This hypothetical example doesn't represent theperformance of any specific investment, but itillustrates the importance of understandingwhat you're actually earning after taxes andinflation. In some cases, the lower risk offeredby an investment may be appealing enoughthat you're willing to accept a low real return.However, pursuing long-term goals such asretirement generally requires having someinvestments with the potential for higherreturns, even if they carry a higher degree ofrisk.

The FDIC insures CDs and bank savingsaccounts, which generally provide a fixed rateof return, up to $250,000 per depositor, perinsured institution. All investments are subjectto risk, including the possible loss of principal.When sold, investments may be worth more orless than their original cost.1 U.S. Bureau of Labor Statistics, 2019 (Decemberyear-over-year change in CPI-U)

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