John E. Girouard • October 27, 2016

In this starkly divided political season, the clients I talk to every day seem to be unanimous. Regardless of party registration, they all believe that if the opposite party wins, […]

John E. Girouard • June 22, 2016

This month, it is hard to walk down Georgetown’s cobblestone streets and not run into a blushing bride or …

John E. Girouard • March 24, 2016

Just imagine robbing a bank on the one day that millions of people have made a deposit amounting to billions of dollars.

April 18, or Tax Day 2016, is that one day this year for a certain type of scammer. A particularly pernicious form of fraud, tax-related identity theft is when someone uses sensitive personal information (such as your Social Security number) and files a fraudulent tax return in your name to collect a refund.

According to recent statistics, scammers filed more than five million returns in 2013 using stolen information, costing the IRS $5.8 billion in fraudulent refunds. Most victims don’t realize that anything is amiss until they file, only to be notified that a return has already been filed in their name.

I’ve experienced this firsthand. Last year, someone filed a fake tax return under my Social Security number. At first glance, I was hoping someone was generous enough to pay my taxes for me — my lucky day!

But by no fault of my own, the outcome is much more cumbersome. I can no longer file a tax return electronically. I had to actually, physically, go down to the IRS office just to get a copy of my transcript to refinance my mortgage.

My identity, like that of millions of Americans, was compromised by scammers seeking to defraud Uncle Sam. And there are plenty of scammers out there. Recent reports indicate that more than 900,000 people received phone calls, seemingly from the IRS, asking them to verify their bank account number for their refund or demanding payment. Nearly 4,550 victims have collectively paid over $23 million as a result of this scam.

Scammers have made Tax Day go from unpleasant to nightmarish. Now, not only do we have to write a check, but we also have to worry about who else, besides the government, could be reaching into our wallets.

To decrease the chances that you too will be scammed, follow these simple steps:

• The federal government will never call you demanding payment on taxes owed. (They are far more likely to send a guy in a nice leather jacket with a set of handcuffs.) Never give your personal information, including your Social Security number and date of birth, to anyone over the phone.

• Get a shredding machine and make sure that your devices — laptops, cellphones, etc. — have encryption tools to protect your account numbers and other personal information.

• Seek out a financial professional who can properly calculate what you owe in taxes and suggest ways to reduce your payment and avoid a large refund, which can attract scammers.

Don’t let April 18 get you down. Remember: Tax Freedom Day — the day when the average American stops earning money to pay taxes and starts earning money for him- or herself — is right around the corner, on April 24.

*John E. Girouard, author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” is a registered principal of Cambridge Investment Research and an Investment Advisor Representative of Capital Investment Advisors in Bethesda, Maryland.*

John E. Girouard • February 18, 2016

If you are anything like the hordes of people rushing to see this year’s Oscar-nominated movies, then you have seen, or at least heard of, “The Big Short.” But unlike other blockbusters, this movie is more than mere entertainment; it is a timely lesson for many investors, who are once again watching the stock market take a tumble.

As I have written many times, investors are only human — which means they are funny creatures that tend to have short memories and act impulsively. Academics call it the “cycle of emotion” or, even better, the “14 stages of trading psychology”: Optimism, Excitement, Thrill, Euphoria, Anxiety, Denial, Fear, Desperation, Panic, Capitulation, Despondency, Depression, Hope and Relief.

Unless you are extremely indifferent or have never put money into a stock, bond or bank account, you’ve most likely found yourself going through these stages.

But what “The Big Short” teaches us in bright Hollywood colors is that from 1937 to 2007 Wall Street only operated with Optimism, Excitement and Thrill.

What is investing, anyways? It is what the founders of capitalism understood perfectly: how to use someone else’s money to make money for everyone else. In fact, one definition of capitalism is “increasing cooperation amongst strangers.”

The turning point came in 1981, with the first conversion of a Wall Street partnership (Salomon Brothers) into a public company. In a partnership, the partners typically take controlled risks with their money. But when these firms went public the game changed. They were no longer making decisions with their money, it was someone else’s — and the more risks they took, the more money they made. If they bet wrong, they lost someone else’s money, not the partners’.

But if you watched the movie (or have watched the markets in the past couple weeks), you should understand what I hope the average investor will finally realize: there is a difference between saving and investing. One may seem boring and slow, but should be the bedrock of any financial plan. The other is gambling; someone else is placing the bets for you and taking a portion of your winnings if you hit the jackpot.

Once you have enough financial security, then you can jump on the roller coaster of investing. Just make sure you can stay on until you reach the end of the ride and can disembark safely.

As a Certified Financial Planner and fiduciary, I look at all financial products based on their purpose and how they can help my clients build wealth and financial security for their families. But in my industry it is all about Wall Street versus insurance companies.

Perhaps asset allocation needs to expand beyond Wall Street products and the average investor’s only other asset, his or her home. Rather than let your emotions get the best of you, perhaps it’s time we all learned how to manage our cash the way the banks do. After all, they don’t take risks with their money, only ours.

John E. Girouard, author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” is a registered principal of Cambridge Investment Research and an Investment Advisor Representative of Capital Investment Advisors in Bethesda, Maryland.

John E. Girouard • January 11, 2016

Did you know that if you pay $10,000 in taxes this year it could easily amount to over $26,000 in wealth over 25 years?

Far too often I see clients who unnecessarily give away money, both in taxes and lost earnings that could have earned them a sizeable rate of return over their lifetimes — and a sizeable fortune for many investors.

As the end of the year approaches, now is the last chance for many to reduce their 2015 tax burden. Unfortunately, many investors focus on getting a one- or two-percent higher return on their portfolio or perfecting the target price on their stock while leaving the 20 to 30 percent of what they can control on the table for their accountant to handle.

We all know we can’t control the markets, interest rates, the economy or numerous other life events that can wreak havoc on our portfolios. But what we can control is how many of our hard-earned dollars we give away each year to Uncle Sam — and our ability to control this typically diminishes as we age.

There are many lists and articles out there extolling the top five things you can do to reduce taxes by year-end, such as maximizing retirement contributions, paying January’s mortgage payment in December, bunching medical deductions in one year and tax-loss harvesting. But here are a few other suggestions that may be new to you.

• If you have inherited a Roth IRA or an IRA and you don’t take a required minimum distribution like those individuals over 70, you will be subject to a 50-percent penalty.

• Medical expense deductions have risen to 10 percent of your adjusted gross income versus 7.5 percent for certain income groups (other than retirees).

• If you are a military family, you are eligible to put your Servicemembers Group Life Insurance benefits in a Roth IRA.

• If you have lost a family member who was receiving a federal government pension, your unrecovered after-tax contributions are deductible in the year of death. This is a huge benefit commonly overlooked, especially in our community.

• If you have made a statement of charitable intent or a promised future gift, consider setting up a charitable gift fund in a high-income year, even though the gift can be made over time.

• Finally, beware of the hidden tax inside your mutual funds. In a volatile year like 2015, many investors will see their portfolio lose value, then wake up April 15 to a surprise: a tax liability.

“The hardest thing to understand is the income tax,” said Albert Einstein. About this, and so many other things, he was right. So this holiday season, take a few minutes to seek out the help of a professional — or go online and look up “overlooked tax mistakes.” Because once it’s gone, it’s gone.

Author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” John E. Girouard is a registered principal of Cambridge Investment Research and an Investment Advisor Representative of Capital Investment Advisors in Bethesda, Maryland.