When it comes to investing your money, you want to get the most out of it. But your goals and values will dictate the most of what. Perhaps you are looking to maximize retirement savings and tax deductions, or maybe you’re looking to maximize your community impact. Our panel of experts offers suggestions on options for creating value with your investments.
Panelists: Steve Saltman, President & CEO, New Hampshire Community Loan Fund, communityloanfund.org
Rebecca Acorn, Senior Accountant III, Mason + Rich, masonrich.com
Rebecca Acorn, Senior Accountant III, Mason + Rich
Q: What are some tips for making tax-efficient investment decisions?
A. For those who haven’t started to invest, you need to set goals and start small. Take the first step by including investing in your budget. Consider setting up automatic transfers into a taxable investment account and/or automatic deductions from your paycheck into your employer tax-deferred retirement account. If you don’t see the cash in your checking account, you are less likely to spend that money. If your employer offers a 401(k) match, take full advantage of the match; it’s free money for your retirement. Consider both tax-deferred retirement and Roth plans.
With a deferred plan, payment of tax is deferred until withdrawal. Under a Roth plan, tax is paid now, but distributions are tax-free. Most people won’t win the Powerball (a one in 292.2 million chance) or find that diamond in the rough penny stock (odds unknown) — slow and steady always wins the race.
Work with professionals who collaborate. An investment advisor will guide you through decisions such as making investments that match your risk profile and rebalancing your investments, however, if you’re not consulting with your tax accountant then you might be losing some of your wealth to your least favorite Uncle (Sam).
For those that have sizable retirement/investment account balances, you can consider the most tax-advantageous way to pass along those funds to your charitable causes.
When you reach a certain age, you will be required to withdraw an amount from your retirement account. Under current laws (2024), you can have up to $105,000 of this required minimum distribution (RMD) from your retirement account distributed directly to a qualified charity. This donation reduces your taxable income by the amount contributed. If in the 35% bracket, you could save up to $36,750 in taxes and your favorite charities would receive $105,000.
Another strategy is to donate appreciated stock from your taxable investment portfolio to the charitable organization of your choice. If you donate the stock, you can receive a charitable deduction based on the fair market value of the investment without paying tax on gains, and the charitable organization gets the full value of the stock in their portfolio. If you do not routinely itemize your tax deductions, you might consider bunching deductions together into one year to be able to itemize benefits from a larger deduction. Please discuss with your tax adviser to understand the limitations, they will be happy to help you optimize your deductions.
Steve Saltman, President & CEO, New Hampshire Community Loan Fund
Q: What is impact investing, and how is it different from other kinds of investments?
A. All investors are looking for returns. But impact investors are looking for returns that are both social and financial. The term “impact investing” wasn’t coined until 2007, but the New Hampshire Community Loan Fund has been helping investors realize social and financial returns since 1983. That’s when we received our first investment of $38,000 from the Sisters of Mercy and used it to make a loan to New Hampshire’s first Resident-owned Community (ROC). The Sisters of Mercy earned fixed annual interest for their retirement accounts while also saving 13 families from losing their homes.
Today, the New Hampshire Community Loan Fund is entrusted with $160 million from more than 600 individual and institutional investors. Their dollars create the pool of capital that we lend to borrowers who have been systematically excluded from traditional lenders because of low incomes or poor credit. They include resident-owned manufactured-home communities, manufactured-home buyers, farmers, small business owners and child care providers.
Collectively, our investors have fueled $1 billion in economic impact. The social return, while harder to quantify, is even bigger.
Q: What do you mean by social return?
A. To understand the social return of an investment, look at its outcomes. Community Loan Fund investors know their dollars are directly helping their neighbors and building stronger and more self-reliant communities.
Tangible outcomes of impact investments in the Community Loan Fund include more than 11,000 affordable homes, 4,400 jobs, and 4,500 child care spaces created or preserved through our lending programs.
Other outcomes of their impact investments are less obvious. For example, with secure housing and quality child care, kids have improved educational outcomes, employees have improved job performance, and everyone has better physical and mental health. The benefits extend from those individuals and households to employers and local economies.
Q: Who are your impact investors?
A. Our 600+ impact investors include individuals, nonprofits, religious organizations, foundations, financial institutions and businesses. “Community” is in our name, because we give everyone the opportunity to invest in their neighbors. This means we work with investors who have as little as $1,000 and as much as $20 million, and every amount in between.
We attract investors who put a real value on social returns and are willing to take lower financial returns. We need low-cost capital to keep rates low for our borrowers.
Increasingly, we are being approached by business owners who are desperate for workforce housing and want to invest in our unique solution to preserving affordable homeownership across the state.
Q: How are your investors preserving housing affordability?
A. Our largest lending program is the Resident-owned Communities (ROCNH) program. Owning a manufactured home in one of the state’s 151 ROCs is now more affordable than renting an apartment in New Hampshire.
When a manufactured-home park comes up for sale, we help interested and willing residents form a cooperative and purchase their park to become an ROC. Together, these residents gain control over the affordability and livability of their community.
Often, park residents are competing with private equity firms that want to buy the park and maximize profits by raising lot rents and cutting back on services and amenities. More than 9,000 affordable homes have been protected through the ROC program. But there are still about 250 privately owned parks in New Hampshire, and they come up for sale all the time. The lending capital provided by our impact investors will give those residents the chance to preserve their community’s affordability.
We believe that manufactured home ownership is an important piece of the affordable housing puzzle. We are one of a few lenders who provide fair, 30-year, fixed-rate mortgages for these homes, and the only one who makes them available to people with lower incomes and credit scores.
Formerly called mobile homes, while not actually mobile, they are ideal opportunities for first-time homebuyers as well as those ready to downsize. They are built to last and new models have beautiful amenities like granite countertops and cathedral ceilings. Creating more of these affordable homeownership opportunities will help free up the rest of the housing stock while helping more people start building generational wealth.
Q: Why do you lend to borrowers that traditional banks will not?
A. It’s our mission: To provide systematically excluded people and communities, in New Hampshire and beyond, with the financial, human and civic resources they need to be economically secure.
We’re not just a lender. We have spent more than 500,000 hours since 2017 helping people become and remain successful borrowers. We provide coaching and flexible terms through the life of a loan, helping more people build credit and become active participants in our economy.
But traditional banks are vital to our work and some of our largest impact investors. They entrust us with lending capital to meet the needs of borrowers they can’t serve.
Q: How does someone become an impact investor in the Community Loan Fund?
A. Information, including our rates and terms, can be found at communityloanfund.org/invest.
Investors choose their interest rate and term, and whether they want to have their interest paid annually or compounded over time. Some investors choose to receive no interest at all, while some donate their interest back to help fund our program delivery.
We have never failed to repay an investor in our 41-year history. Still, it is important for potential investors to read our Offering Circular and other application documents thoroughly to understand the potential risks and rewards.
For more information about how to make an impact investment in the Community Loan Fund, contact Katie McQuaid at kmcquaid@communityloanfund.org or 603-856-0728.