At KROST and KROST Wealth, we have many clients engaged in the entertainment industry who lean on us for our expertise. From accounting, tax, wealth management, and the like, we are in solidarity with our clients and understand the situation they are going through. Below are some timely tactical financial planning ideas that may help you get through this difficult time.
Firstly, on behalf of the entire KROST and affiliated companies, I would like to extend our deepest empathy.
During this strike, you may run into difficult times financially that may test your resolve. As experts in the financial planning arena for entertainment professionals, there may be some opportunities for you to utilize. Here are a few ideas listed below:
- Use your savings – In any new engagement, our planning team emphasizes an aggressive savings strategy with 3-6 months of liquid savings. This strategy of cash investment is designed specifically for this moment.
- Use your investments – Your non-retirement investment account may also be a source of liquidity in this situation. We don’t want to endanger any future appreciation or create unwanted tax liability by selling your total portfolio all at once, so if you need some short-term cash, you can tactically liquidate losing positions and harvest those losses to be used against future gains. Another option would be to use a margin or a line of credit against your investments for immediate cash flow. These two should not be considered long-term options but may be helpful in the short run if you can pay it back after the strike is over.
- Elimination of costs – Start looking at your variable costs that can be liquidated. Cut back on non-necessities, such as Starbucks, dining out, gyms, and social clubs. These luxuries can wait and welcome you back with open arms after the strike.
- Charitable contributions – I understand that charity is an important cause, and the vast majority gives generously, including Guilds, Projects, Churches, and Relief organizations. At this time, cash is king, so it may make sense to halt charitable contributions until after the strike. You will still get the full benefit if done before December 31, 2023, so there is no reason to contribute right now.
- Vacations – Consider low-cost alternatives. During these times, limiting expenses is incredibly important. Instead of traveling to Europe, consider a drive up the coast to Solvang. Rather than Hawaii, try Ensenada. Catalina is a personal favorite and is only a short boat ride away.
- Start a writing project you have always wanted to do. Take this time to write that novel or one-act play.
- This may not be a cash flow idea, but it can be very advantageous. Many times, when our clients have down years, we look for opportunities in their advantage. One way to do that is to use the ROTH conversion rule to offset any income realized in those years. The ROTH conversion transfers assets from a qualified plan, such as IRA or SEP, to a ROTH IRA. This, in effect, makes the transfer taxable but without the 10% penalty. If you are operating at a lower income level or even taking a loss, the ROTH conversion can create a tax-free asset for the future. Conversions must be done before December 31, so keep track of your income, as that may help later.
- Depending on your income, filing status, and amount of gains, realizing gains during the years your income is lower can make a significant difference in the amount of tax you’ll pay on those assets.
I have been in this business for almost two decades, and one thing I can tell you is that “This too shall pass.” Take this time to get to know your family better and spend more time with your parents or siblings. Make the best of it, personally and financially.
Our offices are always open and available to help guide you through your options. Contact me if you have any questions.
About the Author
Philip Clark, CPWA®,CFP®, CLU®, Director/Portfolio Manager
For over 15 years, Philip Clark has helped clients prioritize their financial goals. He has a passion for taking complex tax and investment strategies and integrating them in a logical and comprehensive way. In his role as Director/Portfolio Manager, he focuses on KROST client wealth care, including estate and tax consulting, insurance analysis and retirement, investment strategy, and more. » Full Bio
*Both qualified retirement plans and IRAs typically involve fees, expenses, and services that should be compared when considering a qualified plan rollover.
This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional. These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 07/20/2023 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results.
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