Taxes - CH blog“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin, 1789

And in this world, where we try to minimize taxes, we need to stay updated on the newest tax laws and the recent changes in many of our paychecks. Recently, the IRS released a revised withholding calculator to help verify allowances and ensure you aren’t getting too much or too little of a pay bump. You may want to review the new numbers and avoid a few surprises when you file your taxes in 2019.

Bill blog 2-15In my column this month, I remind readers to get their fair share of the market and then move on. When your energy is focused on one specific hot stock, you miss the whole point of passive investing as discussed in my book, The Coffeehouse Investor. You miss out on the things you should be focused on – getting on with your life.

Published 20 years ago, the Coffeehouse principles still ring true.

“When you accept that your common stock portfolio will do no better or worse than the broad indices tracked, you are putting the pursuit of performance in its place.”


When we meet with clients who are approaching retirement, we always discuss the next chapter. Ensuring a client is financially prepared for retirement is one thing, but what’s often ignored is the mental preparation required for retirement. It can be an alarming adjustment when the working life abruptly stops.

Have you penciled out how you intend to spend your time and energy during retirement? Take this quiz to give you some insight on where your attention should be directed.

As you carefully build long-term financial plans, you need to consider your own personal retirement plans. Hopefully, these plans encourage you to continue growing and pursuing dreams, even after the day job ends.

A few important takeaways from the new tax bill signed into law include:

  • With the increase in the standard deduction ($12,000 for individuals and $24,000 for married filing joint), the limitation on the deduction for real estate and state income taxes ($10,000 per year), and the elimination of certain miscellaneous itemized deductions, fewer people will itemize, and instead choose to take the standard deduction.
  • Individuals with little or no mortgage interest will most likely take the standard deduction unless they have substantial charitable contributions or medical expenses.
  • Going forward, if individuals don’t generally itemize and they wish to maximize the deduction for charitable contributions, it may make sense to bundle dome1several years of contributions into one year or fund a donor-advised fund.
  • If you are over age 70 ½, it becomes even more beneficial to make charitable contributions directly to your charity from your IRA. These contributions, which are limited to $100,000 per year, are not reflected in your income and also satisfy the required minimum distribution (RMD) requirement.
  • You can now distribute up to $10,000 per year from a 529 education plan for K-12 expenses. This should be considered in your long-term education plan, if applicable. In addition, this could be another way for grandparents to help save and pay for their grandchildren’s education.
  • (Applicable to Washington) Though the Federal Estate Tax exemption has been doubled, it is still important to remember that Washington State’s estate tax has an exemption of $2,193,000 (2018) per person. Even if you are under the federal exemption, estate planning is still important if you are in the range of the Washington State estate tax.

Working with a tax professional or financial advisor can help you work through many of these new details. If you want to invest in a more tax-efficient manner or build your long-term financial plan, let’s connect.

If you have spent any time on our website, you may have played the game “Outfox the Box.” We thought it was time we reviewed the concept again in case you were thinking about derailing your investment plans.

Are you interested in the entertainment value of the stock market, or is your primary goal to maximize returns and minimize your risk in an effort to reach your long term financial goals?

It is as simple as that.

The Coffeehouse philosophy of investing can be summed up in a quick game called “Outfox the Box.”

Are you ready? You are the contestant in this game. There are ten boxes, and you know how much is in each box. These are your choices, it looks something like this….

$1000 $2000 $3000 $4000 $5000
$6000 $7000 $8000 $9000 $10,000

Which box will you choose? (Remember, you know how much is in each box)

This is not a trick question. Anyone would choose the $10,000 box. The choices you make when building a diversified portfolio are just as easy.

This time let’s change the rules a little. This time only the $8000 box is shown. It looks something like this….

$8000 ?? ?? ?? ??
?? ?? ?? ?? ??

Now which box will you choose?

The answer is also obvious – you would choose the $8000 box.


Because the chance of increasing your winnings is not worth the risk of choosing an amount substantially less, unless of course you are a gambler, in which case, you are probably at the wrong website, and should be here instead.

With the stock market average consistently beating 75% to 85% of all mutual funds, it is a testimony to the gargantuan advertising budget of the financial industry that so many investors forego a sure thing of the $8000 box in search of something better.

While you’re at it, do you feel lucky? Scroll down to the bottom of this page and try your luck at Outfox the Box.

Wall Street spends $20 billion dollars a year in advertising dollars trying to convince you to forego the $8000 box in search of something better.

Sometimes we need to step back from the clutter and fray and ask ourselves…

Is it worth the risk?

Is it worth my time?

Is it worth my money?

Wall Street says it is. (What else are they going to say?)

The next time you ponder these questions, remember how quickly you chose the $8000 box.


With the new year fast approaching, it’s time to purge, cleanse, and refocus on what’s important. The same goes for your finances. Take this time of year to simplify finances, rebalance your portfolio if necessary, and revisit your long-term financial plan. Are you on track to accomplish your goals? Here’s a great list to get you started.

Don’t forget to do a little housekeeping and verify security measures, update passwords, and order your free credit report. If you were involved in the Equifax security breach, make sure you took all necessary steps to secure your personal information.

Organizing the minutia and creating financial clarity for yourself will provide peace of mind to enjoy 2018 and beyond. Happy New Year!

bookcupStill looking for the perfect give for your favorite investor? The Coffeehouse Investor book provides a wealth of advice on investing in a tax-efficient manner, the importance of creating a financial plan, and how to get on with your life while ignoring Wall Street. Bill’s quick wit and simple strategies are perfect for the beginning investor or the “expert” who continues to try and beat the market.

Besides sharing a wealth of knowledge on investing and the markets, Bill includes stories about summiting mountains, growing up on a wheat farm on the Washington Palouse, and his infamous pumpkin pie recipe to savor your taste buds.

Give the gift of common sense investing this year, you won’t regret it.

With the year-end approaching, it is always wise to consider a few tax planning opportunities. Some of these strategies may be affected by upcoming potential tax changes with the current administration. However, the basic tenants of tax planning still apply no matter what happens. These include:


Regardless of what tax bracket you are in, it generally is beneficial to reduce your income or defer to another year. This may be especially true if tax rates go down next year. Some strategies to consider include:

  1. Delaying or deferring income to another year if it is possible and prudent. You will want to talk with your CPA to make sure this is a viable option in your situation.
  2. If you are 70 ½ or older, you can contribute up to $100,000 directly from your IRA to a qualified charity. This avoids taxation of the income on the distribution and is the most tax efficient way to fund charitable assets from IRA funds.


  1. Maximize charitable contributions. Also, consider gifting long-term appreciated stock or mutual funds to a charity. You avoid the capital gains on the stock and receive a deduction against your ordinary income.
  2. Sell stocks or mutual funds that are in a loss position. You can offset the loss against other capital gains or capital gain dividends. Any losses in excess of capital gains are deductible against your ordinary income up to $3,000.
  3. Maximize your retirement contributions. The maximum 401(k) deferral is $18,000, or $24,000 if you are 50 years old or older. If you own a business, consider all retirement plan options since some can provide greater contributions than others.
  4. Maximize your Health Savings Account (HSA) contributions. The individual contribution rate is $3,400 and the family contribution rate is $6,750 for 2017.
  5. Keep track of your additional sales tax on home additions and car purchases. If you have made large ticket purchases during the year, you may be able to get an additional deduction on your tax return.


These strategies don’t necessarily result in a deduction, but they do provide tax-free or tax-deferred savings options.

  1. Maximize IRA contributions. Even if the contributions aren’t deductible, the growth would be tax-deferred.
  2. Consider a backdoor Roth IRA. If your income is too high to directly fund a Roth IRA, you still may be able to contribute through a backdoor Roth IRA.
  3. Fund your child’s Roth IRA. If they have earned income, you can fund a Roth IRA up to their earned income or $5,500, whichever is less. This is a great way to save money on a tax-free basis and start your children on a long-term investment plan.

With any investment plan, having a long-term financial plan that encompasses a tax-efficient approach is the best method. Sticking to that financial plan is then your next best move.


Securing adequate Medicare coverage can be a challenge. Here are three tips to consider in securing a cost-effective plan for you.

As health expenses rise, paying attention to your health as you age is more important than ever. Review “Keep your body tuned up and your mind tuned in.”  Simple stuff, to be sure, but aging well means addressing the basics of eating, sleeping, socializing, exercising, as Tara Parker Pope points out in this thought-filled article.

We are huge fans of compounding here at the Coffeehouse – it’s the gift that keeps on giving. During Thanksgiving, we discuss the best part of the “investment pie” and the advantages of holding your investments over the long haul.

Individuals who spend time selling stocks and mutual funds that go up in price are missing out on the largest piece of the money pie because they don’t give their investments a chance to sit there and do what they supposed to do – compound. There are two great examples in the Coffeehouse book on the power of reinvesting dividends over time. In the first example, 60% of the profit increase is due to compounding! Why would you ignore a piece of the pie like that?

Speaking of pie, we also enjoy eating a great pie. We want to share Bill’s pumpkin pie recipe from the book, enjoy! From our family to yours, Happy Thanksgiving.

Pie recipe2