Crane Asset Management LLC
Chief Investment Officer
Crane Asset Management LLC is a full-service investment counseling firm providing investment management services to private individuals, retirement plans, endowments, and charitable foundations. All accounts are managed on a discretionary basis. John Frye founded the firm in 2003, with a partner who remains Chief Operating Officer. They work with all of their clients to formulate a long-term investment strategy that will meet their investment objectives while addressing their risk profiles. Understanding their clients in this way enables them to develop unique plans based upon each of their clients’ needs to help them achieve their financial goals.
Before co-founding Crane Asset Management LLC, John served as Executive Vice President and Portfolio Manager at Renberg & Associates in Beverly Hills. He began his career with E. F. Hutton & Company in New York and subsequently worked with Alex. Brown & Sons in Baltimore. He received his Bachelor of Arts in Politics from Princeton University in 1977 and his M.B.A. from Columbia University Graduate School of Business. John holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Los Angeles.
BA, Politics, Princeton University
MBA, Finance, Columbia Graduate School of Business
Assets Under Management:
Crane Asset Management is registered with the State of California. A copy of Crane's Form ADV filing (Parts 2A and 2B) can be accessed here. In addition, Crane's Form ADV (Part 1) can be downloaded from the SEC's website. (Type in Crane's name in the field provided and follow the instructions on the site to download the information required.)
First of all, at the moment neither version of the tax bill eliminates the mortgage deduction. One retains it as-is, with a $1 million cap on allowable loan balance; the other version lowers that to a $500,000 maximum. Secondly, this deduction is only available to individuals for their primary residence. It has never been available to most REITs. Third, REITs don't pay taxes. They pass through their "funds from operations" to shareholders, who then pay full marginal income tax rate on the distributions they receive.
In general though, a lower mortgage deductible cap will raise the cost of owning a home and thus make expensive homes (or any homes in certain locales) less attractive to buy. I wouldn't expect a disaster, though. Conceptually it makes sense to me that the government should not indirectly subsidize the cost of an expensive home owned by a wealthy person.
But to answer your question, this change in the tax law should not affect REITs.
Think about it a second: Your funds have gained $29K on an $81K investment, or about 36%. Assuming you are in the 20% bracket you will owe $5800 in taxes if you sell. (You may also owe state taxes too, if you live in a state with income tax.) $5,800 is 5.3% of your total account. You don't like fees of about 0.7%, so you're willing to pay 5.3% to end the pain? That doesn't make much sense to me. Even the cheapest index funds charge a management fee. So if you save a half-percent per year it will take you more than ten years to make up what you lost to the government by selling. (More, if you pay state income tax.) But only if the performance of what you might buy will equal the performance of what you now own. Ask yourself: How has my account performed, net of fees? You should expect them to be behind their benchmark by 0.7% per year, so if they have done better than that, you fees have bought something worthwhile having.
I see two flaws:
(1) Retiring at 53. How silly! At that age you should just be getting going. If you are not satisfied with your career path, take measures between now and then to develop skills that will allow you to live a productive and fulfilled life. If you climb into that rocking chair at age 53 it will drive you stir-crazy by the time you are 54.
(2) Cutting back on savings from $50K per year to $35. Don't you think you will be earning more money 6 years from now than you are today? For the rest of your working life, put away the same percentage of your take-home. As I say over and over, you need 20 times your living needs in liquid assets if you want a secure retirement. That means if you want to live on $200,000 per year, you've got to have $4 million in savings. An $800K Roth is a great start but not a lot to live on. Particularly if it's got to last 40 years.
You are off to a terrific start and I love to see how confident you are of being so wealthy in 22 years that you can walk away. But at 53, you will have a lot of years ahead of you. You know the saying: "Wear out; don't rust." Find things to do that will fill your life with joy. You will have a lot of life experience in 22 years. Plan on making yourself useful doing interesting and important things. It would be nice if those things also paid well.
If you are starting with amounts as small as $3,000, you are better off buying index funds. Split the money between large, mid and small cap indices. I am sure the other responders will give you lots of ideas. Once you have a decent nest egg you can build a portfolio of individual stocks. Don't try to trade, or time the market. Just invest constantly and steadily regardless of market conditions.
I am adding a response because the savings rate is so low in this country that I hope I can do my part to improve it by repeating over and over on Investopedia that you've got to put money away. My suggestion to you is to "pay yourself" $1,000 per month. Deposit the money into a brokerage account at the same time you pay your rent, your utilities, etc. Do this in addition to your 401K deposits, if you are making them. (I hope you are.) If you are 30 and have never invested you are late to the game and need to catch up. You need liquid investments of 20 times your living needs by the time you retire. It's sooner than you think. Good luck.
You don't state your salary or your expected living needs once the kids are grown and gone. But given what you have told us, it's clear that you are not even close to having enough to retire on. You need roughly 20 times your annual living needs, after deducting any steady income (such as Social Security or a defined-benefit pension). So don't start feeling flush and overextend yourself. You should probably be putting (or trying to put) 20% of your gross salary away into savings every year. This number inclludes all savings types. If you put a payment down on a house and take on a big mortgage you will most likely be unable to retire comfortably. Don't fall into the trap of thinking that your house is a vehicle to build savings. Too many people find themselves "house-poor" in old age and unlocking your home equity can be expensive or disruptive.