Many times, I sit down and write these letters with a clear understanding of what items I want to cover because they are newsworthy or something remarkable has happened.  This is not one of those times.

Compared to last year at this time, this letter would be about as boring as they get.  No massive equity drop, no interesting change in interest rates, no fat-fingered trade entered by a swiss banker, which creates a massive flash crash.  Nope.  Nothing like that.  This quarter was marked by being unremarkable.

Equities are up, bonds are down a little, inflation is up, and so are interest rates.  GDP is at a massive growth, but after 2020, how could it not?  Bitcoin? Dogecoin?  We aren’t able to discuss those in these letters, but I probably couldn’t add any more insight than you might find on CNBC.

Retirement Plans

This quarter, I have gotten a lot of questions about retirement plans, as would be expected. Considering California’s requirement for businesses of all sizes to sponsor a retirement plan for employees or face the CalSavers option,owners are not given much help.  If you are a business owner and have more than 5 employees, you will (if not already) be required to offer your employees a retirement plan.  There are several options out there.  We have placed many clients in affordable programs that benefit the employees (if they contribute), but significantly affect the owners.  Call me for more information.

Asset Location

Also, I have had significant conversations about asset location and the percentage of client’s investable assets that should be housed in retirement plans vs. non-qualified (regular brokerage).  While this seems like the tail wagging the dog, I am increasingly concerned with this percentage. It should be affected by things like income tax, capital gains, income in retirement, legacy planning, business planning, real estate holdings, and charitable intentions.  Understanding the long game related to how, when, and how much to take from retirement accounts should not only be thought of in retirement but also while contributing.  This is a very in-depth subject but could also save thousands (and maybe millions) in income and estate taxes over years of a protracted retirement plan.


In 2021, we have seen a return to a more normalized equity environment.  Whereas the index is not driven by only 5 huge stocks.  Small Caps have SIGNIFICANTLY outperformed large caps (12.7% vs. 5.9%) in 1Q 2021, and I am guessing that trend will continue.  It has benefitted to own diversified assets (stocks and bonds) as their BETA has diverged and is now negative (BETA represents relativity in returns.  In this case a “Negative” means as one goes down, the other goes up).


A lot depends on Biden’s tax proposals and whether they become law.  At this point, it isn’t easy to speculate, and frankly not worth your time to read my guesses on the matter.

A couple of ideas continue to work for specific clients, however:

  1. Roth conversion: See 4th paragraph regarding retirement income.
  2. Donor-Advised Funds: Excellent strategy for those folks considering charitable donations into their retirement and currently at higher tax brackets. Contribute APPRECIATED stocks to the DAF and get a deduction in that year.  No requirement to give from fund annually (currently, but may change).
  3. Cash Value Life Insurance: Stay insured throughout prime earning years and protect family while growing assets tax-free (if structured properly). Avoids income tax on distributions (again, if structured properly) and may have tax-free death benefit to kids.  This doesn’t even add to income for social security and Medicare premium calculations.
  4. Irrevocable Life Insurance Trust (ILIT): Buy an insurance policy in a trust to pay estate taxes at death. The benefit is tax-free and assets are out of estate.  In my opinion, the best bang for your buck, in regard to paying estate taxes.

529’s are great for multigeneration college planning.  Assets are out of estate and grow tax-free if appropriately used.  Pro Tip: Don’t contribute past the child’s age of 13 if only using for 1 child.

As always, my door is open for questions or concerns. If you know someone who could use our help, please reach out and set an introductory video chat.

Philip Clark, CPWA®, CFP® | Director – Wealth Management
Direct: 626.788.3947

This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional.

These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 04/30/2021 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results

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