You can hardly watch a business newscast or read a business publication these days without a reference to the looming “fiscal cliff” – that precipice at which $1.2 trillion in spending cuts are made while Bush-era tax cuts expire.
It’s a scary thought, one that has some speculating that the U.S. economy would automatically tumble back into a recession. As an investor, you may fear that your portfolio would fall along with everything else. Should you strap on a financial parachute in anticipation of that day in January?
The biggest danger may be overreacting, making moves that are driven out of fear rather than logic. A financial advisor who takes a conservative, long-term approach to building your investment portfolio is a great ally in maintaining the calm, reasoned perspective needed to avoid panicky decisions.
While each person’s situation is different, most of us benefit by diversifying our investments. Even if the White House and Congressional leaders cannot work out a solution before reaching the fiscal cliff, not all investment classes would suffer. That’s why it’s essential that you spread your dollars among a wide array of assets—stocks, bonds, mutual funds, government securities, certificates of deposit and so on. While diversification can’t guarantee a profit or protect against loss, it can boost your chances for success and help reduce the impact of volatility on your portfolio.
Next, let’s consider the capital gains and dividend tax issues. For the past several years, qualified dividends and long-term capital gains (“long-term” meaning assets held for more than one year) have been taxed at a maximum rate of 15%. Unless Congress intervenes, starting in 2013 those dividends will be taxed at your individual income-tax rate and the long-term capital gains will be taxed at 20%. Also, depending on your income level, your dividends and long-term capital gains may also be subject to an additional 3.8% Medicare tax.
As of this writing, we don’t know for certain if those changes will occur. In the face of that uncertainty, the main criteria you should consider is what makes sense for your overall investment strategy, regardless of what Congress does. So, if selling those long-term holdings is a good idea for other reasons, doing so now at least guarantees you’ll get the 15% tax rate. If they are assets that you acquired as part of a buy-and-hold strategy, selling them now may not be prudent.
Regarding the dividend-paying stocks, you may want to shift some of them into your traditional IRA, in which your earnings can grow tax-deferred, or your Roth IRA, where earnings grow tax-free, provided you’ve had your account at least five years and don’t start taking withdrawals until you’re 59-1/2.
Another possible move if you’re in a higher tax bracket: You could benefit from owning municipal bonds, which generates interest that is free of federal taxes and possibly state and local taxes as well.
It’s always smart to be aware of the larger political and economic environment as you consider your financial situation. You just don’t need to let the frantic news accounts drive your decision-making.
This article is provided by Vance L. Falbaum, CIMA®, a Financial Advisor at RBC Wealth Management in Tucson, Arizona, and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice.
RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC
Photo credit: Henry Makow
Even against a background of steady demand and declining vacancy, warehouse rental rates have yet to reach pre-recession levels. Although there has been a slight uptick in rents since year-end 2011, asking rents are still far from their 2008 values.
Nothing is more rewarding to our team than granting the money we raise through our Foundation’s annual pancake feed. Who would think the employees of a local firm could change lives and make a difference flipping pancakes one gorgeous autumn day each y…
Metropolitan Tucson’s unemployment improved, ending at 7.6% in August versus 8.6% the previous August and better than statewide unemployment which remained at 8.3%. The state of Arizona is currently ranked sixth in the nation in job creation, boding well for progress locally.
While job creation will be the primary driver of overall market health in Tucson, the housing market shows signs of continued stabilization, with positive downward trends in foreclosure notices and trustee’s sales. Median September 2012 sales were up 25% year over year.
RETAIL MARKET OVERVIEW
Minimal change occurred in the Tucson retail market during the third quarter. Vacancy edged to 8.6% on virtually flat absorption of negative 9,031 square feet (sf). On the positive side, asking rents increased from $14.45 to $14.72 per square foot (sf), with rents highest in the southeast submarket and lowest in the west.
The Hispanic shopper’s importance to the Tucson retail market continues to grow, with influence from both sides of the Arizona/Mexico border. Curacao, a consumer electronics and appliance chain catering to Spanish speakers, opened a 90,312-sf store after choosing to wait out the recession. Mexican shoppers spend approximately $1 billion in Tucson stores and restaurants each year, according to the Metro Tucson Convention and Visitors Bureau.
Active and expanding retail sectors include fitness retailers (Chuze, Planet Fitness and LA Fitness all taking down new locations), mattress dealers (Mattress Firm and BedMart), as well as
expansion in the food service business, from fast food to fast casual and sit down. Such activity is an early indicator of increased consumer confidence. “Better burger” chains such as Smashburger, Five Guys, Culver’s, and Freddy’s Steakburger are all opening new locations in Tucson. Other new retailers to the market include Conn’s Electronics and Buy Buy Baby in the former Linens ‘n Things space at Foothills Mall. Walmart remains active in the region, opening at The Bridges at Ajo and Kino and developing a Neighborhood Market format on the eastside at Broadway and Camino Seco.
Investment sales of retail centers show improvement in price per sf, with first half 2012 sales prices at $152 psf, up 15% over the same period in 2011.
Despite a fairly flat quarter with regard to underlying market fundamentals, Tucson is gradually moving toward a more balanced retail market. Concessions are less generous than in recent years, and tenants wield less leverage, while they still have the upper hand. Expect University-area student housing developments and the 2013 completion of the Tucson Modern Streetcar to drive related retail interest along the route.
With Amazon and other internet retailers now required to pay sales tax in California, progress may be made toward a national solution, a move heralded by brick and mortar retailers here and throughout the nation.
Click here for a map and glimpse of statistics in major industrial markets around the U. S., courtesy of Cushman & Wakefield.
For more information on the Tucson retail market, please contact one of our market-leading specialists or visit our website to search properties and learn more about PICOR’s retail real estate services.
Data source: CoStar Group
Photo credit: Ohl.com