Do Your Taxes Like a Rich Person -- Here's How

Many people underutilize their retirement accounts, said Jason R. Escamilla, CFA of ImpactAdvisor.

 This can be an expensive mistake, especially for moderate earners in high income tax brackets. Consider increasing your retirement contributions or moving funds from a taxable account to a Roth account. With Roth IRAs, you can withdraw contributions (not earnings) without paying taxes or a penalty.

“For example, if you’re over 50 and only putting in $20,000 of your income, you leave behind the chance to move $10,000 more into the 401(k) and convert $10,000 in a pre-tax IRA into your Roth IRA,” Escamilla said. “The combination of those steps can be tax neutral and the net effect is moving $10,000 of your wealth into a Roth IRA where all earnings are tax free.”

Side benefit: This $10K Roth conversion becomes available for withdrawl, penalty-free in five years.

The Curious Dilemma Of ESG Investing And Your Retirement

Jason R. Escamilla, founder and CIO of ImpactAdvisor LLC in San Francisco, has seen it all before. It was nearly 30 years ago when he initially tried Socially Responsible Investing (“SRI”), the predecessor of ESG

“I first got involved with SRI/ESG investing in the 90s. For decades, it was about selectivity and choice or preferences—primarily among institutional investors/clients.

“Funny thing happened on the way to going mainstream. ESG became the bully. The divestment movements ushered in powerful attention and support...Now that it’s mainstream, ESG and sustainability preferences get integrated into a wide range of investment products in many cases by default,” he says.

“It’s not surprising to those ‘on the other side of ESG’ to get offended or even bullied. Elon Musk/Tesla’s experience is a great example: Tesla has been the single most important force in EV transition for decades. But its low ‘G’ and ‘S’ scores got the company kicked out of the S&P 500 ESG index.”

[At IMPACTADVISOR we believe the world is a better place when investors have the choice to invest responsibly -- according to your own definition of responsible investing: you won't be excluded from owing Tesla if it fits your definition]

Self-Directed IRA: Know the Risks Before Investing

Jason Escamilla, CEO of ImpactAdvisor in San Francisco, says using a self-directed IRA to hold certain assets makes the most sense only under specific conditions.

He cites a situation in which an investment faces unfavorable tax treatment outside of an IRA. Certain crypto transactions may fall under that category (or private lending). A self-directed IRA could also make sense if an account is large enough to spread out any extra fees over the asset base. "Examples include paying the annual and transaction fees of the self-directed IRA custodian," Escamilla says.

An investor cannot use debt or margin borrowing in an IRA without taking an additional tax hit. Real estate and other cash-flowing investments often involve debt financing, frequently backed by a personal guarantee. But if the asset is owned by an IRA account, debt financing with a personal guarantee triggers what's called unrelated business taxable income, or UBTI. A self-directed 401(k) account can avoid UBTI triggered by debt financing if there is no personal guarantee from the IRA account owner. This is called non-recourse debt.

In addition, Escamilla notes, there should be no personal benefit from an investment held in a self-directed IRA. "No joy rides on the rental yacht," he quips

401k Experts Believe These Are The Most Critical Fiduciary Priorities

“My top priority is savings into the accounts of plan participants, says Jason R. Escamilla, Founder, CIO ImpactAdvisor LLC in San Francisco, California.

“This includes employer and matching contributions—401k plans exist to fill retirement accounts with savings. This is our key metric.”

Direct Indexing Is Taking Off...

Jason Escamilla, co-founder of ImpactAdvisor, who built his own direct-indexing platform for his ESG-focused and high-net-worth clients in California: It’s a long-term commitment to reap the compounding benefit of tax-loss harvesting, and it’s best for investors who will likely always have high capital gains to write off.

Investors who don’t have the long-term time frame to enjoy the tax benefits of direct indexing should stick to ETFs, Escamilla suggests.

Nate Geraci of the ETF Store says direct indexing is a better option versus ESG ETFs for those investors who hold very strong beliefs because the strategy is so targeted. “It does offer a very elegant solution to allow investors to express their personal preferences,” he says.

Many people underutilize their retirement accounts

“If you’re over 50 and only putting in $20,000 of your income, you leave behind the chance to move $10,000 more into the 401(k) and convert $10,000 in a pre-tax IRA into your Roth IRA,”  Escamilla said.

“The combination of those steps can be tax neutral and the net effect is moving $10,000 of your wealth into a Roth IRA where all earnings are tax free.”

NOTE: This $10K Roth conversion becomes available for withdrawl, penalty-free in five years.

How to invest $100,000—the smart way

“Bond yields haven’t been this high in over a decade. This means you get a decent return with low-risk, especially short-term, government bonds right now, even for long-term retirement savings,” says Escamilla.

“P2P lending works best for small investors who also like to roll up their sleeves and do more work and who enjoy being part of P2P lending either from an impact or social betterment perspective,” 

but “P2P lending lacks liquidity or ‘resale value’ if you need your money back sooner.”

Does It Ever Make Sense To Borrow From Your 401(k)?

“If you leave your employer or worse, get laid off, your 401(k) loan may become due within as short as 90 days,” says Escamilla.
“And if you do not have the cash to pay it back, not only does it become a taxable distribution, but also the 10% early distribution penalty may apply (+2.5% in California).
This means you could be on the hook for 50% or more in taxes and penalties.”

“Sure, you’re ‘paying yourself the interest,’ but don’t forget  that interest gets taxed on the back end when it comes out of the 401(k)/IRA account,”  says Jason R. Escamilla, Founder and CIO at IMPACTADVISOR in San Francisco.

“In taking out a 401(k) loan, your cash flow used to repay the loan often comes at the expense of future 401(k) contributions. If you have to lower your 401(k) deferrals in the future, you are increasing your taxable income that year.”

The Family Office Model

“Jason R. Escamilla, the CEO at San Francisco-based Impact Labs Inc. described the family office model:

“Software and technical innovation are lowering the hurdle to cost-effectively offer comprehensive wealth management to a broader set of people,” Escamilla told Moguldom.

Should The SEC Ban ESG Funds?

[At IMPACTADVISOR we believe the world is a better place when investors have the choice to invest responsibly -- according to their own unique definition of responsible investing.]

“ESG/Impact/Responsible Investing is still developing,” says Escamilla. 

“With ESG, the biggest flaw is the lack of a single definition: the concept represented by the letters ‘ESG’ differs widely among investment professionals, politicians, retail investors and Elon Musk. Tesla has been the single most important force in EV transition for decades. But its low ‘G’ and ‘S’ scores got the company kicked out of the S&P 500 ESG index.”

“Tobacco companies are commonly understood as not fitting into Socially Responsible Investing portfolios, but Philip Morris has a better ESG rating than Tesla.” says Jason R. Escamilla, Founder and CIO of ImpactAdvisor in San Francisco. “One might feel the same (paradox) about Big Sugar.”

Savvy Money Moves To Make When Earning $90K a Year

“What’s often missed at this income level is taking advantage of underutilized Roth IRA contributions for savings that may not be long-term,” says Jason R. Escamilla, CFA, CEO at ImpactAdvisor LLC.

This might include a portion of your 'emergency fund', when properly invested, to minimially avoid taxes on interest earned.

Dow Suffers Worst Decline Since 2020 as Fed Signals Sharper Rate Hike

“Jason R. Escamilla, founder and CEO of ImpactAdvisor, told The Epoch Times that the markets are embracing a bearish sentiment.”

“His calculation based on the American Association of Individual Investors (AAII) data shows the markets reached 15% bullish sentiment, the lowest in 30 years, last week and 18.9% this week.”

Learn From Billionaires: Investors Should Consider Selling Concentrated Stock Positions

Jason Escamilla is CEO at ImpactAdvisor in San Francisco, where many investors have tech company options. He says a large percentage of the firm’s clients hold individual stocks. Balancing the tax hit against diversification may involve more than simple tax-loss harvesting, he says.

“At some point, portfolios run out of losses to harvest with basic tax-loss harvesting strategies. This is especially true when the portfolio consists of broad-based funds,” he said.

In some client accounts, Escamilla’s firm employs what he terms “strategic gain realization.” That could mean turning to vehicles such as
donor-advised funds, charitable trusts and qualified opportunity zone funds.

Passage of Biden’s Plan to Tackle Infrastructure Crisis Creates Challenges and Opportunities

Jason R. Escamilla, CFA, is the founder and chief investment officer of ImpactAdvisor. He warned that, “When this bill is signed, two important business-friendly measures will disappear in order to pay for the new spending. There are many businesses in need of this stimulus who don't even know about them.”

The measures include the Employee Retention Credit in Q4 and the Small Business Administration’s targeted EIDL Advance  for businesses in low-income areas.

Roll Over Your 401(k) To A New Employer?

You have the option to convert the old plan to a Roth IRA. But you lose this option once you roll over into another 401(k) plan.

Roth IRA conversion will have you adding on the rollover money to your income taxes in the year in which you make the switch.

Jason Escamilla cautions that you can only do this conversion once and that you’ll need to be aware of income limits to enjoy the full tax benefit.

What’s Your Go-To ETF?

The first is the ARK Innovation ETF (ARKK), which is actively managed but with a reasonable expense ratio and tax efficiency you cannot get from a mutual fund. . .

When it comes to investing in megatrends or innovation, it can be easy for fund managers to lose discipline. . .

The second fund is the Freedom 100 Emerging Market ETF (FRDM), an emerging market ETF with a reasonable expense ratio and access to emerging markets while avoiding exposure to China and other countries where lack of freedom and human rights is an added risk, as has become all too clear recently.

The mandate of the fund is. . .adherence to certain principles of human rights and freedom, and a wide range of other ESG criteria. . .

ESG: 'People want to save the world, but not necessarily pay more taxes'

“Jason Escamilla, CEO at ImpactAdvisor, has been with firms specializing in ESG investing since the mid-1990s. Historically people who were interested in ESG were younger with fewer assets or institutions with certain investing mandates, but since the pandemic, he’s seen older high-net-worth individuals seeking out his firm for its expertise in ESG investing.”

“Escamilla says his higher-net-worth clients don’t look exclusively at an ESG offering as the key decision point when deciding whether to invest with him.” 

“Tax-efficiency, multi-account management, financial planning, access to adviser, trust of firm/adviser and estate planning expertise also matter,” he said.

Current Income ETFs: Bond Fund Alternative?

When the underlying bond market is thrown into disarray...Jason Escamilla, CEO of ImpactAdvisor, noted that ultra-short ETFs traded at discounts of as much as 5% off their net asset value during that period.

The risk of acute market stress can make it harder to sell shares at values close to their buy-in levels.

“If it's parking cash that you want to do, it's less work with mutual funds, unless it's a highly liquid ETF where a market order gets you close enough to NAV,” he said.

Evolution of Indexing | Direct Indexing

For investors in high-tax states with taxable-account holdings, direct investing allows much easier tax-loss harvesting, because he can trim individual stock holdings, rather than a basket of ETFs.

“You open up a wide range of tax opportunities,” he said, including moving appreciated holdings into donor-advised funds.

“The beauty of direct indexing is you can pick what your definition of responsible investing is,” Escamilla added

iPhone 12 Mini Sales Could Imply Bigger is Better

“As the phone becomes more the part of daily living for all age groups, it helps to be easy on the eyes.”

Escamilla noted that a big phone also means there’s room for better camera hardware or longer battery life, something increasingly crucial as daily screen time increases.

What Trump vs. Biden Means to 401k Plan Sponsors and the Typical Plan Fiduciary

“Retirement savings are a large untaxed base of wealth,” says Jason R. Escamilla, CEO at ImpactAdvisor LLC in San Francisco, California.

“Higher tax-bracket individuals will find lower tax incentives from 401k contributions. Lower-tax bracket individuals will get bonus tax savings/credit for contributing.”

Tax Bombshell: Just One-Fifth of American Workers Pay More Than 80% of All U.S. Income Taxes

The picture becomes more complicated when analysts try to match tax returns to individuals or households.
“Are you talking families or are you talking single people?” said Jason Escamilla

And who earns what levels of income is a shifting measurement.
“The top 1% changes every year”  Escamilla said.  “...people have sold their business because they’re retiring.”

So what appears like a massive income might be the one-time sale of a life-long business.

Direct Indexing | Advisors & ETFs: A Perfect Match?

There are two benefits to direct indexing: better customization and even greater tax efficiency. Being based in San Francisco with clients in the technology industry and residing in a high-tax state such as California, direct indexing makes a big difference, Escamilla adds.

“Direct indexing is an incredible product for a high net worth person who has professional support from a CPA and an advisor,” he says, noting direct indexing brings a level of complexity. “If you do direct indexing, you start to lose your ability to do your taxes on an iPhone app.”

...another way he mitigates tax hits is to use closed-end municipal bond funds. Escamilla watches for sizable discounts to occur, such as what happened in the March sell-off, which gives him a margin of safety for clients while adding alpha over time.

9 Best Muni Bond Funds to Buy and Hold

Jason Escamilla, CEO of ImpactAdvisor, says he uses closed-end funds for his muni bond investors.

One of his criteria is a strong margin of safety, meaning a lesser chance of long-term losses.

The right professional designation depends upon an advisor's niche.

“The retail investor wants clarity and certainty. The CFA charterholder knows all too well the risks and uncertainties.”

We’re in a recession — will the stock market ever act like it?

“Historical valuation fundamentals are less important than the basic laws of supply and demand, which always prevail, however volatile along the way,” says Jason Escamilla, CFA, CEO at ImpactAdvisor, an advisory in San Francisco.

He points out that cash on the sidelines is at all-time highs, as everyone else waits for the dip, too, indicating that investors have been waiting for the pullback for some time. That strategy of waiting, too, may be a crowded trade that ends up offering investors only modest returns.

How to write a strong business plan

Escamilla says he looks for the unit economics of a business with a clear breakdown of customer acquisition costs.
a rule of thumb...he looks for a one to three ratio of customer acquisition cost to the lifetime value of the customer.

How Do 401k Plan Sponsors Administer the Plan From Home?

What’s the biggest challenge for those responsible for administrating their company’s 401k plan

“Let’s face it, for the people we work with, 401k plans never make the top-10 of their to-do list,” says Jason R. Escamilla, CEO at ImpactAdvisor LLC in San Francisco, California.

“The ability to meet them remotely, with less effort on their part and ours is actually a plus. Meanwhile, all HR & finance professionals have more pressing matters right now.”

Wall Street takes a deep breath and braces for Monday

“This weekend offers little to no hope that we will be closer to turning the corner.” wrote Jason R. Escamilla, CEO of ImpactAdvisor.

“Best to keep praying through Super Tuesday.”

Will a rise in dark-pool trading impact retail investors?

Jason Escamilla, CEO and chief investment officer at US wealth manager ImpactAdvisor, plays down these concerns.

“...I don’t see dark pools as a problem in and of themselves. The point is, the retail investor is a different animal from someone who needs to move a large number of shares in a dark pool.”

Impact Labs Introduces IMPACT Full Stack ('IMPACT_x'):

An Integrated ESG/Sustainable Investing and Reporting Solution
Responsible Investing, Redefined℠

The tech-enabled responsible investing offering is designed for investment professionals ready to graduate beyond traditional investing and incorporate impact, sustainability, and values- or mission-aligned goals

By adding expertise in values-aligned investing, traditional advisors can enhance their relationship with existing clients and expand their addressable market for new clients.

5 common myths about refinancing your mortgage

When you refinance to a loan with the same term, you reset the payment clock, explains Michele Sine, portfolio manager and senior wealth adviser at ImpactAdvisor.

“It’s an uneven playing field when it comes to payments. In short, the bank always wins, because they get their money first,” Sine says.

A vegan ETF just launched. Should you buy?

Jason Escamilla, CEO of investment firm ImpactAdvisor, has a new portfolio simulation website called Vegemize that helps people pick individual stocks and even bonds from companies that match specific social metrics for things like gender equality and CO₂ emissions.

“We're looking more at what to include and not necessarily exclude,” Escamilla said about Vegemize, which launched Monday. “We want to build a portfolio from scratch so investors can have their cake and eat it too.”

Impact Labs Introduces Vegan-Themed Index-Tracking Portfolio Simulator: Vegemize.com

I've yet to meet a vegan who did not care about ingredients, says Jason Escamilla, CFA, Impact Labs' CEO.

But when it comes to 'putting your money where your mouth is,' Vegan or 'green' clients must still demand maximized returns and optimized risk when investing their savings. Our software can deliver on both, while also quantifying the client's impact where it matters most.

New front in trade war thumps US markets

“I am less concerned that the net effect of all this will be higher new tariffs over the longer term.

It’s too easy to cut a mutually beneficial deal as this escalates.”
-Jason R. Escamilla

Will There be a Currency War? Behind China’s ‘Momentous’ Decision to Weaponize the Yuan

Understand Your Investing Risk Tolerance

Jason Escamilla, CEO at Impact Labs in San Francisco, describes a two-step plan for tackling client risk:

First, protect the client’s wealth

Second, ensure they can meet their goals.

When approaching risk, Escamilla incorporates both emotion and analytical risk analysis.

Seven Best Retirement Stocks to Buy and Hold

“Apple is a well-run growth company that has extraordinary profit margins at a reasonable valuation.”

“It is further de-risked when you consider management's continued preference for buying back shares over pursuing untested and lower margin alternatives,”

-Jason Escamilla

Making One Smart Move as a New Grad Can Set You Up for Financial Independence

“Time is a special thing, and you can stack the deck in your favor for retirement by having time on your side,” says Jason Escamilla, chief investment officer of ImpactAdvisor in San Francisco.

“It’s not just the discipline of investing but putting a long time horizon on your investment planning.”

8 Best Municipal Bond Funds to Buy and Hold

“...provides a margin of safety or potential for better resale value at some point in the future, he says.”

Municipal bonds: The antidote for those retail investors on a low-SALT diet

“When you’re looking to park taxable cash,
there are smarter places than a money market fund”

“Married, two kids; $430,000 of income, no deductions and
you keep less than 48 cents on the dollar in money market interest/dividends.”

“And don’t forget about the Fed’s 2% inflation target” -Jason Escamilla

Ten years after 2009: S&P 500 is 4x; international markets have only doubled.

“More accommodating monetary policy and lower valuations in the international markets present an attractive opportunity”
-Jason R. Escamilla, CEO of ImpactAdvisor

12 Stocks You Should Never Sell

Jason Escamilla, Chief Investment Officer with San Francisco based ImpactAdvisor, says,“With Apple, you get a well-run growth company with extraordinary profit margins at a reasonable valuation.”

“As a long-term investment, it is further de-risked when you consider the company's demonstrated preference for buying back shares over pursuing low-margin and higher-risk growth.”

The 7 Best Podcasts for Investors

Bloomberg Surveillance is for investors with their finger on the pulse of the markets, says Jason R. Escamilla, CEO at ImpactAdvisor in San Francisco

“The show’s a perfect combination of the most knowledgeable guests in the industry and smart questions around the day's most interesting issues.”

How AI Will Change Investing

“Human advisors have a good sense of the value of their client's time and when to make the call," says Jason R. Escamilla, CFA, CEO and chief investment officer at ImpactAdvisor in San Francisco.

Road Block: Robo Advisors Can’t Find ‘On-Ramp’ To Help Investors

Jason R. Escamilla, CEO and chief investment officer at ImpactAdvisor LLC, in San Francisco says the most recent tax changes demonstrated the edge humans have over technology in finance.

“When tax reform passed last year, days before year-end, we were able to save our clients thousands of dollars, each, with tax-smart last-minute action items,” he said.

“There was no iPhone app making those calls.”

Strong Corporate Profits Buoy U.S. Stock Market

“The trade war is real and will continue beyond the election,” said Jason R. Escamilla, CEO, and chief investment officer at ImpactAdvisor

“But the trade war’s effects are a rounding error compared to the huge tailwind created by tax reform. Tax reform alone will continue to drive corporate profits.”

A Decade After Lehman's Collapse, Some Say It Can Happen Again

Bisnow interview with ImpactAdvisor CEO and Chief Investment Officer Jason Escamilla:

“No doubt (in 2008) I was very bearish on the market, launching a short-fund most of 2008. There was no shortage of news stories, friends and family members accessing easy credit to fuel all sorts of borrowing and spending.”

“Today, our economy and corporations are among the most efficient in the world. The number of blatant signs of excess pales by comparison with 10 years ago.”

“Meanwhile, the social effects from 10 years ago cannot be underestimated. Things like Lehman and Bernie Madoff left individual investors highly skeptical in these 10 years since.”

“The new visceral skepticism today helps keep the industry in check”

Booted by the Dow: What Does It Mean?

“The Dow matters and it matters more right now for GE than for Walgreens,” says Jason R. Escamilla, CEO of ImpactAdvisor in San Francisco.

“Why? ...perceptions matter.”

When Lump Sum Investing Works to Your Advantage

The benefits of lump sum investing over dollar-cost averaging hold true.

Jason R. Escamilla, CEO and chief investment officer at ImpactAdvisor, calls dollar-cost averaging a market timing strategy. “Dollar-cost averaging should not be used for purposes of enhancing performance."

"Dollar-cost averaging is simply a risk reduction technique: It is easing into a proper long-term investment strategy instead of implementing it immediately.”

IMPORTANT NOTE: There is much to consider before we will answer this question for any individual client: every new client-relationship comes with a different mix of client(s), advisor(s), portfolio(s), tax situation(s), investment mix, preferences, etc.

Leveraged ETFs Are a Loser's Game

With choppy investment markets, you might be tempted to seek higher returns in leveraged ETFs, but they are a loser's game. Even sophisticated investors get burned by them.

In fact, "very few investment professionals understand the risks over time, let alone retail investors and people in the media," says Jason R. Escamilla, CEO of ImpactAdvisor. These risky investments don't work the same way as typical funds and magnify losses exponentially.

"In certain markets they will dramatically underperform [relative to] the expectations of the everyday investor or finance professional," says Escamilla.

Should I Invest in Bitcoin and Blockchain Technology?

"We view crypto-investing as driven by the greater fool theory of investing or speculation, and we genuinely mean that in a bullish way for now," says Jason R. Escamilla, CEO of ImpactAdvisor, a wealth management firm in San Francisco

Simply put, there are dozens of investment products on the horizon, many of which will introduce entirely new segments of investors to buy bitcoin: adding liquidity by way of all the marketing into new distribution channels. With those forces in place, it's anyone's guess when and at what level this bubble will peak.

"As an investor, you have to ask yourself, if you are getting into bitcoin today: what's your edge over the person selling to you? Simply looking at a chart showing the price rise is not enough," for bitcoin or any other second-hand good that trades in a marketplace.

Beware Of The Bitcoin Bubble: Investment And Financial Advisors Warn

“But it is anybody’s guess what inning. It looks to me like we’re well ahead of the 7th-inning stretch,” said Jason R. Escamilla, CEO of ImpactAdvisor, an investment advisory firm in San Francisco. “The price level and energy usage are unsustainable. There is far better technology emerging to meet the same needs.”

The Newest Metric for Financial Success: Customers’ Emotions

"For Jason Escamilla, CEO of ImpactAdvisor, a wealth management firm that focuses on values-based investments, emotions and money are inextricably linked, as values-based investments are often driven by emotional responses to causes. (For example, an investor may choose not to invest in companies that he or she sees engages in practices detrimental to the environment.)

But..."Being emotional is not an edge in investing," he said.

ImpactAdvisor Expands Algorithmic Social Impact Investment Offering for Mainstream Investors

"Factor tilt and smart beta investment strategies have been added to their wealth management advisory offering that includes socially selective options and tax efficiency."

Impact Labs Expands Social Impact Portfolio Engine

"Impact Labs, a SAAS provider, has added factor-tilt and smart beta options to its social impact portfolio construction platform."

Impact Labs Expands Software Offering for High-Performance Wealth Management: Smart Beta and Factor-Tilt

"A New and Unique Institutional-Grade Social Impact Offering for Financial Advisors and Mainstream Investors."

When Social Responsibility Becomes an Investment Strategy

"Social responsibility is the central theme of US-based software provider Impact Labs. In September, it announced the launch of the first algorithmic portfolio software solely for those who actively adopt ESG investing."

Top Portfolio Products: Impact Labs Adds SRI Portfolio Generation Software

"Impact Labs launched an algorithmic portfolio generation and customization tool that it says builds a properly diversified investment portfolio while optimizing for social value and maximizing after-tax performance."

Impact Labs Launches First-of-a-Kind Algorithmic Socially Responsible Portfolio-Generation Software

"MIT Team makes it easy: investors can now swipe-right for equality, sustainability and dozens more causes and if, like one prominent New England Quarterback, you consider cola to be 'poison for kids', you have the option to swipe-left on Big Sugar. Impact Labs wants to empower advisory firms with an unprecedented level of portfolio customization."