On this episode of "On the Money" the retirement planning specialists at Ruedi Wealth Management discuss the economy in Illinois, dealing with concentrated stock positions, and the new retirement bills passed by the U.S. Senate and House of Representatives.
(1:32) The State of the Illinois Economy
(15:49) Tariffs and China
(19:00) Concentrated Stock Positions
“You probably don’t want to have more than 4 or 5% of your portfolio in 1 company – if even that.”
Paul A. Ruedi
“Don’t have any more money in an individual stock than you can afford to lose.”
David Ruedi, CFP®, RICP®
"The first thing you need to do is look at the cost basis – what you bought the stock for, and how much growth you have. If it is held in a retirement account, you can sell it without any tax consequences. But if it is held outside a retirement account, there can be tax consequences – any of the growth on that stock will be taxed."
David Ruedi, CFP®, RICP®
"One company, no matter how big of a 'blue chip company' it is, it can always cease to exist or take a major hit they never fully recover from."
David Ruedi, CFP®, RICP®
"I try not to let the tax 'tail' wag the dog. To me, just pay the tax call it a lucky tax because it’s a gain. But sometimes we see a situation where instead of selling it all this year and selling it over the next year or two or three – we can stay under the limit and not pay any capital gains tax at all."
Paul A. Ruedi
(25:15) Using Options Contracts to Hedge a Stock Position
"One of the things you can do, but it’s expensive, is to buy a 'put option.' By buying a put option you can lock in a floor on the stock price."
David Ruedi, CFP®, RICP®
"Even more popular than buying a put option is to create a 'collar' around a stock price. The way you do that is by buying a put to lock in a floor, but selling a call option to offset those costs. The downside of this is that it eliminates your upside potential, because if the stock goes above the strike price of the call you may have to sell the stock."
David Ruedi, CFP®, RICP®
(29:36) Transfer Stock to a Donor Advised Fund
"If you are charitably inclined you can transfer some of that stock position to a donor-advised fund. That will give you a big tax deduction that you can use to sell the stock and minimize the tax impact of doing so."
David Ruedi, CFP®, RICP®
(43:00) Secure Act Retirement Reform
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