Wilson David Investment Advisors
I fix things. My specialties are financial planning, financial literacy education, taxes, and investment advice, but over my 30-year career, I've been able to help people fix problems with money, construction projects, meetings, sentence construction, culinary disasters, and academic difficulties.
I wish I were like Samantha of the TV show Bewitched and could just twitch my nose to repair everyone's problems. Unfortunately, no magic erupts when I twitch my nose. I help clients using my knowledge, experience, and hard work...although I like to think that our working together has its own magic. My work as a lecturer, teacher, copy-editor, writer, presenter, negotiator, researcher, and office manager in a diverse cross section of business, educational, and government organizations has helped me gain the depth of knowledge needed to advise my clients in all aspects of sound financial planning and investment. I have been described as a fast, cheerful, flexible worker who rapidly resolves unexpected problems and project difficulties. I manage work quality and time based on guidelines provided and use my talents to provide customers with top-notch service.
As a champion for financial literacy, I speak at high schools, libraries, career fairs, churches, businesses and community groups - anywhere I can get a platform! - to raise awareness about financial knowledge and safety. I recently published "Financial Advice for Blue Collar America" which offers guidance on basic concepts of money including insurance and taxes, financial traps to avoid, how to pay for college and tech school, and info about the bright future ahead for blue collar careers.
BA, College of William and Mary
MA, College of William and Mary
MBA, University of South Carolina
By choosing to work with this Advisor, you acknowledge that neither Wilson David Investment Advisors nor this Advisor makes any representations or promises that the services you receive are appropriate for you and your business or guarantees any specific outcome or results. Wilson David Investment Advisors does not guarantee the suitability of the Advisor for your particular needs and does not endorse the advice and services rendered by any Advisor. Wilson David Investment Advisors is a registered investment adviser registered in South Carolina and GA through FINRA. Any commentaries, articles or other opinions herein are intended to be general in nature and for current interest. All content on this website is presented as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. All investments involve risk, including loss of principal invested. The answers presented on Ask an Advisor should be considered general information presented to inform the public. They are based on the information provided in the question, which may have omitted important details that would have changed the answer had they been known. Please consult a financial advisor before concluding that the information is relevant to your own situation.
Investopedia Video: What Are Stocks?
Hi! Thanks for writing! The answer provided by Investopedia here is great. I'd like to add a few more thoughts.
ETFs are a type of exchange-traded investment product that offer investors a way to pool their money in a fund. This fund makes investments in stocks, bonds, or other assets and, in return, receive an interest in that investment pool. Unlike mutual funds, however, ETF shares are traded on a national stock exchange. ETFs are not the same thing as mutual funds. Generally, ETFs combine features of a mutual fund, which can be purchased or redeemed at the end of each trading day at its net asset value per share with the intraday trading feature of a closed-end fund, whose shares trade throughout the trading day at market prices. To put the difference between mutual funds and ETFs in perspective, imagine a day like Black Monday, October 19, 1987 when the stock market dropped 22.6%. If you had owned ETFs (which were actually not sold in 1987), you could have sold your ETF shares at any time during the day for their value at the moment, which was higher as the market was falling than it was when the day ended 22% lower. Had you owned a mutual fund and sold during the day, the brokerage would have taken your order when you said sell, but the sell price would have been calculated at the end of the day based on the net asset value, which in a 22% drop, would have been very low. The ability to sell the ETF immediately for its price right then as opposed to getting the end-of-the-day value for the mutual fund could save money in the event of a rare market crash.
Mutual funds are still the cornerstone investment of many retirement plans, but ETFs have been gaining in popularity in the past few years. Which is a better choice for your investment portfolio? If you are a long-term, buy-and-hold investor with little interest in trading, you are probably fine with highly rated, no-load mutual funds held by a reputable fund manager since the ability to trade often and quickly is not a characteristic that is important to you. If you prefer to buy and sell more frequently, ETFs offer greater tradability, lower costs, diversification, and transparency and therefore may work better for your objectives.
Hopefully this answer and the others provided give you what you are looking for. If not, please write back to us!
Hi! Thanks for writing. Investopedia’s answer to your question is great. I wanted to add a little more info about dividends in case your question was a general one about dividends and capital gain and less about your own personal interest in earning capital gains and dividend for your own profit. People buy stocks for several reasons including capital appreciation (which occurs when a stock rises in price) and dividends (which are payments made to stockholders when the company distributes some of its earnings to stockholders). So “capital gains” are when you realize capital appreciation by selling the stock. You only take a capital gain in a stock when you actually sell it, and that’s the only time you pay taxes on what you’ve earned. Clients have asked me if they need to pay taxes on a stock that’s appreciated in a year. In other words, if you spend $1,000 on ABC stock in Jan. 2015 and then at the end of the year the stock has gone up and it is worth $2,000, would you owe the IRS tax on the $1000 you’ve made that year? You wouldn’t owe any tax on the amount you’ve earned so far in 2015 because you haven’t actually realized or locked in that gain. A company you own stock in could feasibly go bankrupt at any moment, so the $1,000 profit you have on paper could disappear, and instead of your ABC stock being worth $2,000, it could be worth 0. That’s why you don’t pay taxes on that stock profit – at any moment as the stock market moves and as your stock price moves, your profit changes. It’s only when you sell the stock for more than you paid for it that you realize a capital gain…or a loss when you end up selling it for less than you paid for it, or if the company goes bankrupt.
So a capital gain on which you pay taxes only results from a sale of your stock. A dividend, however, is issued while you own the stock. As described in the first answer, a dividend is cash money paid regularly to its shareholders by a company out of its profits or reserves. When you own stock in a company that pays dividends, you receive a cash payment each time dividends are distributed, which for most companies is quarterly. The company sets a rate per share of how much they will pay. For example, in 2016, PNC Bank pays a dividend of $2.04 per year or (51 cents per quarter) for each share you own. That means if you owned 100 shares of PNC, you would be paid $51.00 that quarter (51 cents times 100 shares). You would continue to receive that cash payment each quarter for as long as you owned the shares and as long as PNC chose to continue to pay that dividend. Each year, PNC would send you a 1099-DIV form that would show how much you earned in dividends, and you would use that form to report them on your Form 1040 and pay tax on them.
I hope this info helps! Best wishes to you.
Hi! Thank you for writing! Let me first define Social Security retirement benefits and Supplemental Security Income (SSI) and then answer your questions.
Social Security retirement benefits are paid to retirees who have paid into the Social Security system and who have reached at least age 62. Social Security retirement benefits are paid to eligible people no matter how much other income or assets that they might have, whereas SSI is for people with limited financial resources. Also, different people get different Social Security retirement benefit amounts paid to them based on the amounts they paid in over their working lives. People who made higher wages over the years paid in more money, so they get higher monthly benefits. Social Security bases benefit amounts on 35 working years. For example, if a person was a high wage earner and earned between $70,000 and $150,000 for most working years, he or she would get more per month in retirement benefits than someone who worked for annual wages between $20,000 and $30,000. The reason for this is because Social Security taxes are based on a percent of how much the person makes, so the person making more has more taken out for the years of working than a person making less. In 2016, the maximum monthly amount a person could possibly be paid is $2,639, but most people don’t earn enough in their lives to reach that benefit level. The average amount that people get is about $1,200, and many people get far less than that per month. You can learn more about Social Security and sign up for an online account here: https://www.ssa.gov/.
Supplemental Security Income (SSI) is a Federal income supplement program funded by general tax revenues (not Social Security taxes): It is designed to help aged (65 or over), blind, and disabled people who have little or no income; and it provides cash to meet basic needs for food, clothing, and shelter. To get SSI you would need to have assets under $2,000 for an individual or $3,000 for a couple, not including a few things like the house you live in and one vehicle. You can read more about SSI here: https://www.ssa.gov/ssi/.
So to answer your questions, you can file for both Social Security and Supplemental Security Income if you are 65 years old or old. You can file for Social Security retirement benefits at age 62, so if you file at that age, you wouldn’t be able to also file for SSI – you’d have to wait 3 years.
In some circumstances, you can receive SSI and Social Security retirement benefits – a person would probably be in the situation where they had not earned high wages throughout their working life and were collecting a low Social Security retirement benefit and also had few assets so that they qualified for SSI.
Based on the info I have I am not sure if you personally would qualify for SSI – it would be a good idea to go online and do the SSI benefit calculator to see (http://ssabest.benefits.gov/) or go to a local Social Security office.
I am so glad you wrote, and I hope this answer was helpful. I’m sorry that you are in this position of needing to worry about having enough retirement income, and I hope you are able to find some ways to bring in more monthly cash. You might want to also go to your local council on aging, the reference desk at the library, or your state department of assistance to learn about help in your state and see if you might be able to get other benefits. Best wishes to you.
Hi! The other answers here are great, and I wanted to add a thought about how taxes work on unrealized and realized gains. People buy stocks for several reasons including capital appreciation (which occurs when a stock rises in price) and dividends (which are payments made to stockholders when the company distributes some of its earnings to stockholders). So “capital gains” are when you realize capital appreciation by selling the stock. You only take a capital gain in a stock when you actually sell it, and that’s the only time you pay taxes on what you’ve earned. Clients have asked me if they need to pay taxes on a stock that’s appreciated in a year or as in your question, on a stock that shows a "paper profit." In other words, if you spend $1,000 on ABC stock in Jan. 2015 and then at the end of the year the stock has gone up and it is worth $2,000, would you owe the IRS tax on the $1,000 you’ve made that year? In the case of this "paper profit," you wouldn’t owe any tax on the amount you’ve earned so far in 2015 because you haven’t actually realized or locked in that gain. A company you own stock in could feasibly go bankrupt at any moment, so the $1,000 profit you have on paper could disappear and instead of your ABC stock being worth $2,000, it could be worth 0. That’s why you don’t pay taxes on that stock's paper profit – at any moment as the stock market moves and as your stock price moves, your profit changes. It’s only when you sell the stock for more than you paid for it that you realize a capital gain…or a loss when you end up selling it for less than you paid for it or if the company goes bankrupt. Thanks so much for writing to us!
Hi! Thanks so much for writing. Yes, I also find the 1099 form a bit confusing and a little irritating sometimes! A quick answer to your question is that yes, the 1099 will both increase your taxes (because you are earning more income) and affect your taxes (because you become responsible for paying not only your own income taxes but also your own social security taxes and medicare taxes AND because you have to file additional tax forms as a result).
In my longer answer, I want to tell you a little bit about how workers are paid and explore the definition of an “employee” in case you want to ask your employer about your current pay situation and see if maybe the employer will begin to pay you using the W-2 income system.
Let me take a minute to briefly clarify the two basic ways employees are paid. Most wage earning employees are paid by employers who formally hire them as employees and pay them wages. These employers pay half of the employee’s social security and medicare tax to the government, and the employee pays the other half, which is automatically taken out of his or his paycheck. The information in the section below is from www.irs.gov.
From the IRS:
Employers use Form W-2, Wage and Tax Statement, to:
- Report wages, tips, and other compensation paid to an employee.
- Report the employee's income and social security taxes withheld, and other information.
- Report wage and withholding information to the employee and the Social Security Administration. The Social Security Administration shares the information with the Internal Revenue Service.
Payers use Form 1099-MISC, Miscellaneous Income, to:
- Report payments made in the course of a trade or business to a person who is not an employee or to an unincorporated business.
- Report payments of $10 or more in gross royalties or $600 or more in rents or compensation. Report payment information to the IRS and the person or business that received the payment.
I am also concerned about the reason your employer is paying you using the 1099 method rather than through the more standard W-2 method. The way it is determined if a person is an employee or a contractor is not the number of hours worked but the way the hours are worked. The full definition is printed below, but the general idea is that if your employer directs what you do at work and how you do it, then you are an employee. For example, if you are a Safety Officer for a construction company that is building a big concrete tank and your employer tells you what tasks to observe for safe behavior, when to do the observations, and what methods you are to use to determine safe operations, you are most likely an employee. If you create the safety plan yourself, inspect the facility for safe operations when and how you see fit, and are able to direct yourself in monitoring the work for safety, you are probably a contractor. The information below is from www.irs.gov.
From the IRS:
Question: How do you determine if a worker is an employee or an independent contractor? The determination can be complex and depends on the facts and circumstances of each case. The determination is based on whether the person for whom the services are performed has the right to control how the worker performs the services. It is not based merely on how the worker is paid, how often the worker is paid, or whether the work is part-time or full-time. There are three basic categories of factors that are relevant to determining a worker's classification:
- Behavioral control (whether there is a right to direct or control how the worker does the work),
- Financial control (whether there is a right to direct or control the business part of the work), and
- Relationship of the parties (how the business and worker perceive the relationship).
For more information on employer-employee relationships, refer to Publication 15, (Circular E), Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide. Also, refer to Publication 1779, Independent Contractor or Employee.
I’m sorry that you are in a situation that makes you feel nervous and uncomfortable. I hope that you will be able to resolve it so that you feel better about your job. Keep in mind that if you made more than $400 in a year you will need to file additional forms with your taxes including Schedule C (Form 1040) and Schedule SE (Form 1040),Self-Employment Tax, to figure the self-employment tax (comprised of social security and Medicare taxes) due.
Best wishes to you, and please write back if you need more information.