Financial advisors can sometimes feel as if they are walking on a balance beam. One way to slip and fall is by not protecting assets in the event of a market downturn. Another pitfall is underperforming markets and not maximizing the peak amount of wealth or the biggest number that could be achieved. In both cases, there are ample opportunities to wind up on the mat. If we set out to achieve the biggest number without regard to the risks, we would likely find ourselves investing more heavily in stocks, weathering short-term volatility, potential double-digit losses in poor markets or suffering from poorly matched timing. For example, at the time a client is withdrawing funds, markets go down. On the other side, the risk of being too conservative with a portfolio potentially means that holdings like bonds fail to pace the cost of inflation and could cause problems later in life.

This is particularly relevant now because we are watching stock markets scale new heights almost daily. The artificial intelligence boom has exploded and pushed equity prices ever higher. While a majority of the stock boom has been concentrated in companies that are directly involved in AI computing - chips, software, energy – the broader market has benefited substantially from the current run-up. Most metrics, or ratios used by market-watchers are on the high side versus their historical averages. Some point to the dot-com boom (then bust), and others to the years prior to the global financial crisis as analogs to where the market is today. Still others point to increasing profits and a favorable regulatory environment as reasons the market could still go higher.

At the same time, the economic picture in the United States is cloudy. Reading daily headlines can keep your head spinning with the back and forth of positive and negative data. The same goes for the opinions of various Wall Street experts and economists. Some are maintaining that stocks can continue their run, and others are battening down the hatches with prognostications of bubbles bursting and markets crashing. The current Federal Government shutdown is not good news for any number of reasons, as the political dysfunction in the US is one thing that keeps rising.

I have often told clients that our job as advisors is not to ‘make you rich’ but to ‘keep you rich.’ These days, this mantra has been coming to mind frequently as the market keeps rising, justifiably or not. When it comes to balancing the goals of clients that are closer to retirement, given that markets have outperformed our modeled returns over the past few years, we feel that we have some room to rebalance into more conservative allocations but stay on track to achieve the goals set during financial planning exercises. Getting our clients from Point A to Point B is the goal – not necessarily achieving maximum balances. For clients with longer ‘runways’ to retirement and decades of earning years ahead, rebalancing is an exercise in preservation of capital and taking some wins off the table.

We remain cautiously optimistic and highly vigilant around your portfolios. We always and only act in ways that we believe are in your best interests. Our goal is to stay balanced and get to the end of the beam without slipping!

 

Given that this is the last quarter of 2025, I always like to share a few year-end planning items that are time-sensitive and are ‘use it or lose it’ between now and the end of the year. Annual exclusion gifts are $19,000 per person for 2025. A married couple may give up to $38,000 to any individual, such as children or grandchildren. Annual exclusion gifts do not count toward your lifetime estate exemption, which is now fifteen million dollars per person federally. Some states (like New York) have different rules and need additional consideration. For minors, gifts can be made into 529 education savings accounts, UTMA (custodial) accounts, or trust accounts (with an additional step).

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For adults, you can simply write a check or transfer stock to that person. Married couples should pay attention to gift ‘splitting’ rules if you are planning on gifting the maximum. Finally, there is the ‘med/ed’ exemption – which is medical and educational. Direct payments to medical expenses or to educational institutions are not considered gifts even if they on behalf of someone else.

Tax loss harvesting is the process of selling securities that have unrealized losses in taxable accounts for the purpose of recognizing those losses. Realized losses can be used to offset capital gains that may have been taken earlier in the year or carried forward for future years. This applies to federal taxes, but some states have differing rules. Lionshead will be reviewing your portfolios under our management and will make these changes on your behalf.

For small business owners and partners in partnerships, we recommend that you consult with your accountant/tax advisors on timing of expenses and/or so-called PTET tax payments. There’s potentially a benefit to pre-paying expenses or taxes in 2025 with the goal of reducing current income tax due.

Contributions to retirement plans (401(k)/403(b) plans), if you are an employee of a company, must be made by the end of the calendar year to qualify for 2025. People over 50 years of age can also make a ‘catch-up’ contribution of $7,500 on top of the $23,500 normal contribution amount. Folks who are between the ages of 60 and 63 are also eligible for an additional catch-up of $3,750 on top of the $7,500. Starting in 2026, catch up contributions will be post-tax only, so this is the last year to recognize the tax deferral benefit. Funding IRAs and Roth IRAs can be done until April 15, 2026, but if you have cash available, it may be beneficial to make those contributions in the current year.

If you are employed by a corporation with fringe benefits, we can assist you with your benefit elections for 2025 and help you consider options to improve or enhance them based on your financial situation. HSAs (Health Savings Accounts) are a useful tool for people with high-deductible health plans, and reviewing available insurance coverages, such as life, disability and long-term care options is always a worthy, if not exciting, endeavor.

Most charitable gifts can be deducted from itemized tax returns. Gifting appreciated stock directly to a qualified charity has the added benefit of not triggering capital gains tax on a sale. Qualified Charitable Distributions from IRA accounts are also good options for some. Gifting to ‘donor advised funds’ may allow you to secure a deduction this year and decide when and what charity will receive the money in the future.

Were there any births, deaths, marriages, or divorces? Have you updated your will and beneficiary designations on your retirement accounts and insurance policies? Do you need to? We recommend that you speak with us and your attorneys or accountants accordingly. As always, please contact us with any questions or concerns and always update us with any changes to your financial picture. Enjoy the falling leaves and cooler temperatures!

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Regards,

Scott Lasky, CFP®

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Disclosures All statements are opinions and should not be construed as facts. This newsletter is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in Lionshead Wealth Management’s products or affiliated products. The information provided is for educational purposes. Your advisor does not provide tax, legal, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions. Further, your advisor makes no warranties with regard to such information, or a result obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. All investment strategies have the potential for profit or loss; changes in investment strategies, contributions or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio.  Lionshead Wealth Management is registered as an investment adviser and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by securities regulators nor does it indicate that the adviser has attained a particular level of skill or ability.

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