Don’t miss the Dividends


Getting regular paychecks with virtually no work is a pretty great thing, and sometimes owning stocks, mutual funds, and ETFs can give you the right to receive these dividends. However, I have seen pitches where these payments are neglected. This post will share some ways to check if dividends have been included in a report.

Example of the Importance

In the image below you can see the return of a common S&P 500 ETF with dividends reinvested versus the price movement only. If you don’t factor in dividends it it looks like a $10,000 investment would have only grown to $38,650, but if dividends where reinvested it could have grown to a whopping $53,990. So they are very important to consider.

Continue reading “Don’t miss the Dividends”

What Happens When You Die?


Don’t let your investment accounts be an additional source of stress for you loved ones when you die. Most retirement accounts and investment accounts allow you to designate people or charities to receive your assets in the event of your death. No one wants to think about their own death, but for the sake of your loved ones, take a few minutes to make sure your beneficiaries are set correctly!

Continue reading “What Happens When You Die?”

End of Roth Conversions?


Roth conversions and backdoor Roth contributions are on the chopping block in congress. It is too early to know what will happen for sure, but there are some indications that this year may be the last chance to move money from a Traditional IRA to a Roth IRA. This type of transfer, a Roth conversion, is a taxable event but can be a great way to optimize taxes depending on your situation. After December 31st it may be removed as an option.

Why Transfer it?

If you have $100 in a Roth IRA and $100 in a Traditional IRA, they don’t have the same spending power. Obviously, they have the same amount of top-line dollars, but if you want to take money out of a Traditional IRA you have to pay taxes first. If your effective tax rate is 30%, then for every hundred dollars in your Traditional IRA it somewhat like you are just holding onto $30 for the government. Regardless of how big or small the account grows, if you tax rate is 30% then you can only spend about 70% of the account value overtime.

If you use a Roth properly you don’t have to pay any taxes to withdraw money! It can all be yours! Plus, there are more ways to spend out of a Roth before retirement than there are in a Traditional IRA. So why not just move all Traditional IRA money to a Roth IRA?

Cost to Move

If you move $100 from a Traditional to a Roth IRA the government wants its share back. So, it is advantages to try and time conversions for years that you have lower tax rates. Remember your tax rate can be much lower some years with no change in the law. For example, if you donate to charity, take a year off from work, or have losses in investments you may have a lower tax rate than an average year. If you expect your income to only increase, it may be worth converting even when it isn’t a particularly low-income year. Plus, Roth IRA’s have some great bonus features!

Roth Perks

When you contribute to a Roth (deposit money) you can withdraw that money without tax or penalty before retirement. If you deposit the money to a Roth via a conversion (transfer from Traditional IRA) it can be withdrawn after five years even if you aren’t retirement age. Any profits you make off the deposits need to typically remain in the account until retirement, but the funds can grow tax free each year until you withdraw them.

Another big benefit is that Roth IRAs do not have required minimum distributions. That means regardless of your age, you can keep the funds in the Roth where they can grow tax free as long as you live!

increase your after-tax balance

Taking the example from above, you may think that you can only move $70 of the $100 into the Roth because of the 30% tax. However, the IRS allows you to pay the $30 to them from other accounts such as your checking, savings, or taxable brokerage accounts. If you transfer the full $100, it is like getting to stuff an additional $30 of after-tax money into the Roth, and it can earn profits tax free.

$5 Billion Tax Free

Roth conversions have only been around for about a decade. When Roth IRAs were first introduced in 1997, they were aimed at helping middle and lower income families save for retirement. One of the founders of PayPal, Peter Thiel, has made roughly $5 billion dollars 100% tax free in a Roth IRA using current rules. What he did is not something most people have access to do. In 1999, before PayPal was publicly traded, he purchased shares for the artificially low price of $0.001 inside a Roth IRA. Keep in mind that PayPal did not trade publicly at the time. This is called “stuffing” and one of the many things that the bill aims to curb. Stuffing and conversions are items that will potentially be taken away to return Roth IRAs to the original purpose of helping middle- and lower-income families.

My Thoughts

For my clients, I do whatever I can to help them reduce taxes legally. That is why I want to do everything I can to help clients take advantage of this while it is allowed, but I think the tax code will be fairer if conversions and a few other items on the chopping block get the axe. This doesn’t mean I agree with all things in the bill, but this part makes sense to me. There is always the potential for further law changes to Roth and Traditional IRAs, but in my opinion the changes being proposed are well within the realm of reasonable.

Will Congress End Backdoor Roth IRA

The Lord of the Roths

Roth Conversions Investopedia

Roth IRA Wikipedia


Tines Capital, LLC (“TC”) is a registered investment advisor offering advisory services in the State(s) of Oklahoma and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by TC in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption. All written content on this site is for information purposes only. Opinions expressed herein are solely those of TC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

Boo! It’s the Tax Man!


Don’t let fear of taxes push you towards bad investments. There are many salesmen out there that get a commission to scare you with the tax boogie man and convince you to invest in inferior investments. You do not need an offshore account or whole life insurance to legally pay a low tax rate! For about the last 20 years the Vanguard S&P 500 index fund had a return of about 7.77%. However, I hear the pitch all the time, “don’t invest in mutual funds because have to give half your money to the government.” Is that true? Would the return drop to 4% per year after considering taxes? No! Even a billionaire in the highest tax bracket could have had an effective after-tax return of 6.46% to 7.34% without using retirement accounts or any other special account! Once you start using retirement accounts it gets even better!

Types Returns

Your specific after-tax return is a lot of work to calculate because it is affected by your income, investments, deductions, state residence, account type, and many other items. That is why most big institutions publish a simplified number for the after-tax returns. It is simplified because it assumes you are in the highest federal income tax brackets. They usually neglect state tax since their are 50 different states, but even with that simplification these after-tax returns are usually a pretty conservative estimate for most people.

  1. Return Before Tax: This is usually the highest return and the one that is published everywhere. If you are investing in a Roth IRA this may be your actual after-tax return.
  2. Return After Taxes on Distributions (RATD): When you have mutual funds or ETFs you must pay tax on any dividends or regular paychecks that get sent to you each year. This return accounts for the taxes you have to pay on that distribution income every year, but assumes you reinvest what is left after the taxes and don’t sell any shares.
  3. Returns After Taxes on Distributions and Sales of Fund Shares (RATDSFS): This builds upon the RATD above and adds in the effect of the taxes due to you selling all of your shares at the period covered. Typically you don’t want to sell all your investments in a mutual fund at once to avoid paying so much in tax. So this is a pretty conservative estimate for many people because of this and the fact it assumes you are a billionaire.

A billionaire’s Return

If you dive into the details of a mutual fund or ETF, you should be able to find a table like the one below with after-tax returns listed. Depending on how a fund operates this after tax return can be much higher or lower than the before tax returns. Since the year 2000 this Vanguard S&P 500 mutual fund has an after tax return that is between 6.46% and 7.34%. That is only about 17% to 6% lower than the before tax return of 7.77%! Again this is if you were a billionaire in the highest tax bracket, which you most likely are not! If you are a billionaire please call Tines Capital 🙂

Tax Optimization

Not all investments are so tax efficient. Active investments tend to not have after-tax returns that are so similar to their before-tax returns. Regardless of the investment type the projected after-tax return must be considered carefully because that is what you can actually spend. Taxes are not fun to do or pay, but they don’t have to be scary. Get a fee-only financial advisor like Tines Capital on your side and don’t get spooked!

It will get bad!


Things are going to get bad at some point in the future, for one of a million reasons, for an unknown length of time. This is a fact of life and something you must come to terms with as an investor. The world always has been and always will be uncertain. There is no set of news events, political circumstances, or market conditions that will free the investor of risk or the fear of loss.

Continue reading “It will get bad!”

How to Open a Brokerage Account

Saving for your future is much easier than you may think. You can also start with as little as $100 using IBKR Lite. This video will show you step by step how you can start your own Roth, IRA, or regular brokerage account. You can manage this account on your own, ask Tines Capital to manage it for you, or do a bit of both. Use the video below as a guide and click here to start an application.