Monthly Archives: December 2016

Recap of 2016 Podcast Episode 1 Recap of 2016

December 30, 2016
As 2016 comes to an end, we put together our first podcast. One of our goals for 2017 is to increase the channels of communication with you. This podcast will give you a quick review of 2016, a history of what happened in our markets, our outlook for 2017, and insight on how we are adjusting our portfolios for 2017 in the market ahead.

Please click the player to listen to the podcast.

At Willis Johnson & Associates, we take the time to understand you by combining employee benefits expertise and financial planning wisdom with the emotional elements of your life.
Willis Johnson, CFP®
President and CEO
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not indicative of future results. Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. This material may contain forward-looking statements and projections. There are no guarantees that these results will be achieved. The S&P 500 is an unmanaged index generally representative of the U.S. stock market and cannot be invested in directly.
Market data obtained from the following sources: Yahoo Finance and Morningstar.

Continue reading Recap of 2016 Podcast Episode 1 Recap of 2016

5 Questions You Should Consider When Using 529 Plans for Education

December 19, 2016

A Guide to Understanding How 529 College Savings Plans Work

Are you planning to save for your child’s college education?

Did you know that there is a more tax-efficient way to save for your children’s and grandchildren’s future educations? 

If you are interested in saving money to pay for educations, you should consider a 529 plan, otherwise known as a “Qualified Tuition Plan.” A 529 plan essentially functions like a Roth IRA if used for education expenses.  You can make after-tax contributions to a 529 plan and invest the funds in the plan.  The funds will grow tax-deferred and if you withdraw the funds to use for post-secondary qualified education expenses, you will not pay any taxes or penalties on the withdrawals.  There are a few questions that clients often ask us about 529 plans:

  • Who should open a 529 Plan?: Anyone, including a parent, grandparent or students themselves, (the owner) can open a 529 plan for a student (the beneficiary). There are no age or income limits to a 529 Plan and anyone can be named as a beneficiary.  The owner controls the investment decisions and the withdrawals from the plan for the beneficiary.  We recommend, if possible, that a grandparent owns a 529 plan for the benefit of their grandchildren.  A 529 plan is included in a parent’s assets for purposes of applying for financial aid, but they are not included if the account is owned by a grandparent.  If your student may need additional financial aid, it is better to keep the 529 plan out of the considered parental assets. 
  • How do I fund the 529 Plan?: You can gift $15,000 annually to a 529 plan without triggering a gift tax. Each grandparent can put $15,000 into a 529 Plan for the benefit of the student or $30,000 per couple.  You can also elect to front-load a 529 plan, up to $70,000 (or $140,000 per couple), for 5 years of gifts.  This is a great advantage for those with large taxable estates.  Not only are you giving money to your children or grandchildren to use for education, but you are also able to move money out of your taxable estate.
  • Does it matter what state I open the account in?: You can use a 529 plan at any accredited college or university in the US, and some foreign institutions, regardless of what state in which you opened the account. Some states offer tax deductions on state income taxes by using in-state plans, but in Texas, we do not have a state income tax so this does not apply to Texas residents. 
  • How do I invest the 529 Plan?: As the owner, you can make the investment choices in the 529 Plan. You will want to consider the time horizon your student has until they start school when deciding how aggressively or conservatively you should invest the account.  You can make investment changes in a 529 plan twice a year. 
  • What if my student gets a scholarship or doesn’t use all the funds in the 529 Plan?: A beneficiary change can be made by the owner to another family member, without any penalty or tax consequences. One 529 plan can be used for multiple children or grandchildren. 

With the holidays quickly approaching, many of you may be thinking about what to give your children or grandchildren as gifts.  While that new video game or new car may be exciting now, giving them the opportunity to have an education is a gift that continues to give and can be their most valuable long-term investment.     

As Ernie Fletcher, 60th Governor of Kentucky said, “Education is our greatest opportunity to give an irrevocable gift to the next generation.”

alexisAlexis Long, MBA, CFP®

Connect With Me on LinkedIn

Alexis Long is an associate wealth manager at Willis Johnson & Associates. For Alexis, financial planning combines an interest in producing detail-oriented financial plans with a desire to help people obtain their goals, ranging from retiring early, paying for their grandchildren’s educations, buying a second home or leaving a legacy for their children. Understanding what is truly important to a client is key to good financial planning, along with providing solid technical advice.

Alexis earned her undergraduate degree in International Business from Texas Tech University and her Finance M.B.A. from the University of St. Thomas.

Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer’s official statement, which should be read carefully before investing. Before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits. The tax rules that apply to college investing options are complicated. Before investing consult with your tax advisor about the tax consequences of investing in college savings plans.

Year-End Tax Planning Under the Assumption of Tax Reform

December 19, 2016

How to Prepare for the Potential Tax Reform

December is here, which means it’s time for year-end tax planning. For year-end 2016, the complexity of tax planning is greater than in years past. As United States President-elect Donald Trump enters the White House with a Republican-controlled Congress, we can expect tax reform. Paul Ryan and Donald Trump have similar goals but have yet to come to an agreement. What does this mean for us? We need to make decisions in regards to our tax-planning based on what may or may not be passed by Congress. What should you do? Below are three thoughts to consider based upon the expectation that we get tax reform:


Expectation: Lower tax rates in the future

Recommendation: Defer income where possible until next year

Under the expectation that tax brackets may be lower in 2017 compared to 2016, people should consider pushing their income into 2017 as opposed to 2016. For many of us, this is hard to do; we get a paycheck when we receive it and that’s it. Consultants, small business owners, and executives are often the types of individuals that are given a choice of when to receive income and when to retire, which also determines termination payouts. For these individuals, deferring income can be as simple as not billing consultant work or small business income until January 2017 as opposed to December 2016 this year.  


Tax Reform and Your Required Minimum Distribution

Furthermore, another option for our clients that are taking their first RMD (Required Minimum Distribution) this year is to defer their RMD till next year. This will allow the income to be received in a potentially lower tax year.


Expectation: Higher standard deductions along with new caps and phaseouts

Recommendation: Bring them forward

Tax Reform and Your Tax Deduction Strategy

Paul Ryan and Donald Trump’s tax plans disagree on what to do about itemized deductions. Trump is proposing a cap on deductions while Ryan’s tax plan would eliminate many popular deductions altogether. Taking into consideration that marginal rates are expected to decline overall next year, our thought process is that our clients should consider bringing forward any tax deductions and utilizing them in 2016 instead of putting the tax deductions on their 2017 tax return.


For example, consider paying 2017’s Texas property tax in 2016 of December. For charitably inclined individuals, consider a Donor-Advised Fund. This can allow you to front-load deductions in 2016 and spread out the money to charity over time. For individuals with large medical expenses, consider paying these expenses before year-end or front-loading costs in 2016 this year.


Expectation: Lower future capital gains taxes

Recommendation: Harvest capital losses and defer capital gains

Tax Reform and Capital Gains

Given the expectations that marginal and capital gains rates will decrease next year, we believe capital losses that reduce taxable income this year can be even more beneficial than normal. We review our clients’ taxable accounts in mid-to-late December to determine if any capital losses are available to harvest. If you see a trade in your account that appears to rotate from one position to another position in the same asset class, it means that we are most likely realizing capital losses and avoiding the wash sale rule.


Likewise, we believe it may be worthwhile to defer taking capital gains into 2017 in order to potentially pay a lower future capital gains tax rate. Of course, taxation is not the only consideration when making investment decisions. Often, it can be better to simply pay the taxes and get out of an investment that has run up but is now overvalued.


Ultimately, tax reform is still an unknown. There are significant differences between Trump’s proposals and Ryan’s plans that will need reconciliation. The Democrats still have enough votes in the Senate to filibuster any legislation, which may mean that nothing will get done without some level of bipartisan compromise.


Despite all of this, the initial template for tax reform is tempting enough to begin considering tax planning today anticipating lower rates tomorrow. As 2017 approaches and the discussion around tax reform gains more attention, we will follow up with you with several planning strategies we are encouraging our clients to consider.


Willis Johnson & Associates is a registered investment advisor. This material may contain forward looking statements and projections. There are no guarantees that these outcomes will come to pass. This information is not intended to be a substitute for specific individualized tax, legal or estate planning advice as individual situations will vary. Federal tax laws are complex and subject to change. Neither Willis Johnson & Associates, nor its investment advisor representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.




Nick Johnson, CFA®, CFP®


Nick Johnson believes that financial planning is more than numbers on a balance sheet and a standardized process. People are unique and should be treated as such.


As Vice President and a Wealth Manager at Willis Johnson & Associates, his goal is to really get to know his clients, all the while providing a proactive approach to comprehensive wealth management.



The Markets (as of market close November 30, 2016)

Market Update 2016The economy picked up the pace in November, as did the stock market. After getting off to a sluggish start during the early part of the month, equities soared following the results of the presidential election. Each of the indexes listed here reached record highs during the month. The Russell 2000 posted the largest monthly gain, reaching double digits. Energy stocks jumped at the end of the month following OPEC’s agreement to cut production. Investors seemed willing to sell bonds and buy stocks as evidenced by the yield on 10-year Treasuries, which jumped 56 basis points by the end of the month and now exceeds their 2015 closing yield. Gold lost value, closing November at $1,174.80, down $103 from its October closing value of $1,277.80.

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