December 29th, 2009
Jane M. Young, CFP, EA
I am a huge fan of short and long term goal setting and the use of to-do lists. We can be much more productive if we organize our objectives and our time. I wouldn’t set out on a major vacation without an itinerary nor would I try to cook a complicated dish without a recipe. Without goals or to-do lists we are too easily distracted. We waste a lot of time and end up going down the wrong path.
I encourage everyone to start with a list of about 20-30 long term goals. From this list identify about 10 things you would like to achieve this year. Then develop a to-do list of things you need to accomplish this week or month. You are way ahead of the game just by writing down some goals and priorities. This forces you to think about your values, desires and objectives for the year. This will serve as your personal strategic plan to make sure you are on the right track.
I know everyone comes up with a list of New Year’s resolutions and we seldom stick to them. So why bother? I think the process itself is good because you have given some thought to what you want to accomplish. You may not reach all of your goals but some of your effort will come to fruition.
I have a special challenge for you in 2010. Think about all the things you would like to accomplish or change in 2010. Select just ONE thing that you must accomplish or change this year and write it down. Make a vow to yourself to do whatever it takes to accomplish this one goal. Create an action plan to reach your objective. Share your goal with at least one other person who will hold you accountable. Be sure to monitor and reward your progress.
If you want to share, I would love to hear about your “One Goal” for 2010 and how you are progressing.
Tags: accountability, Goal Setting, goals, new year's resolution, to-do list, Values
Posted in Goal Setting | No Comments »
December 1st, 2009
Jane M. Young, CFP, EA
1. Make a plan – who will receive a gift and how much do you plan to spend. Stick to your plan, keep track of your spending, and don’t spend on impulse.
2. Start early and give yourself plenty of time to select gifts and compare prices. We always over buy and spend too much when pressed for time.
3. Find creative ways to reduce the number of people for whom you plan to give gifts. Instead of buying gifts for friends make arrangements to make each other dinner or meet for an inexpensive happy hour. Remember that receiving a gift can be stressful and a nice a card or gesture may be more appropriate
4. Suggest that your family or group of friends draw names instead of buying gifts for everyone. It is difficult and expensive to buy gifts for a large number of people who already have everything.
5. Exchange white elephant gifts or favorite used books instead of expensive Christmas gifts. This is especially fun in conjunction with a Chinese gift exchange where everyone gets a chance to steal a gift from the other participants.
6. Gift a homemade present such as a homemade sauce, stew or soup, a painting, a knitted scarf, cookies, or a pie. You can capture a special moment by framing a photo or post card or you can create a calendar with some sentimental photographs.
7. If you have more time than money gift your services such as babysitting, home maintenance, faux painting, cooking a meal, house cleaning, shoveling snow, decorating advice, cooking lessons, a musical performance, or computer instruction.
8. Rather than providing all the food for your holiday party, ask your friends to bring a dish and a bottle of wine. Co-host a party with a few friends and share the cost. If you are planning a neighborhood party, consider a progressive party where each course is served at a different home.
9. Avoid purchasing expensive new holiday clothes. Make your existing wardrobe more festive through the use of inexpensive accessories and scarves. If you really need a new outfit check out your local consignment stores. Holiday and formal attire isn’t worn very often and is usually in good shape at consignment stores.
10. Lower the cost of Christmas cards and postage by using post cards, e-cards, e-mail or a simple phone call. It’s the thought that counts.
Tags: budgeting, budgets, goals, holidays, planning, save money, saving money, spending less
Posted in budgeting | No Comments »
November 25th, 2009
Jane M. Young, CFP, EA
As we approach the end of the year we look back on our achievements over the last twelve months and start thinking about goals for next year. I am a strong believer in personal strategic planning and goal setting. The first step in the goal setting process is to evaluate our values. Thanksgiving is the perfect time to reflect on those things for which we are thankful. By acknowledging what we are thankful for, we can easily identify the values that are of greatest importance to us. Once we have clearly identified our values we can set meaningful goals for 2010. When our goals are in integrity with our values we are more likely to monitor and achieve them. We will find that reaching our goals will be much more relevant and rewarding.
Take a few minutes to write down what you are thankful for this holiday season. Don’t forget to show gratitude to those around you who have helped you to achieve your goals or just put a smile on your face over the past year.
Happy Thanksgiving!!
Tags: Goal Setting, Gratitude, Strategic planning, Thanksgiving, Values
Posted in Goal Setting | No Comments »
November 11th, 2009
Jane M. Young CFP, EA
When selecting a financial advisor you want someone who will act in your best interest. To ensure this is the case hire an advisor who works to a fiduciary standard. A fiduciary standard requires your advisor to put your interests first even if those interests are not in their best interest. According to the National Association of Personal Financial Advisors over 90% of all investment advisors are paid (fully or partially) on commission therefore they are compensated for selling products. Additionally, many of these advisors are employed by a broker/dealer or an insurance company, where they are held to a lower standard of diligence. They are required, as part of that employment, to act in the best interest of their employers.
How do you find an advisor who will put your interests first?
Here are two ways to be sure you are hiring someone who adheres to a fiduciary standard. All financial advisors who are members of the National Association of Personal Financial Advisors (NAPFA) are required to adhere to a “Fiduciary Oath” as a requirement of membership. Additionally, both Federal and State law require that anyone who is a Registered Investment Advisor be held to a fiduciary standard. You wouldn’t accept less from your doctor or lawyer why accept less from your financial advisor?
Here is a link with more information on the fiduciary standard of care:
Http://www.focusonfiduciary.com
Tags: advocate, consumer protection, Fiduciary, fiiduciary oath, investment advisor, NAPFA, registered investment advisor, Selecting a financial planner
Posted in Financial Advisor, Selecting a Financial advisor | No Comments »
November 4th, 2009
U.S. News and World Report - The Best Life
Comment By Philip Moeller
Posted: September 14, 2009
The Boomerater™ Report, our weekly collaboration with online baby boomer resource Boomerater, this week helps widows plan for their financial future while avoiding mistakes others have made. “My dear husband recently passed away,” a Boomerater member writes. “For 40 years he handled our finances and I’m lost without him. I want to make sure our savings last so that I have financial security. My husband was a wonderful handyman who could fix anything and he did most of the yard work. I am considering selling the house and moving to a retirement community. Also, I work full time, but am thinking of retiring or changing to a less demanding job. There are so many decisions to make, where do I start?” Here is what other members said:
Take your time—don’t make rash decisions. It may seem impossible to consider a normal future right now, but you will be amazed at how much strength you have. Please do not make any changes right away. Learn what you can about your finances and keep the bills up to date. But don’t make major life changes like retiring or moving in a rush. A great place to start to put things in perspective is a Web site run by the Women’s Institute for a Secure Retirement. They have a retirement calculator to help you know how much you will need to live, resources for estate and retirement planning, details about types of survivor benefits and Social Security, pensions, etc. Another good site is operated by the Women’s Institute for Financial Education, and focuses on women’s financial independence. Just having a place to start was a big help for me when my husband died.
Get help to develop a realistic plan. Take some time off from work if you can but I wouldn’t recommend changing jobs or moving right now. Don’t worry about fixing things around the house—most of that can wait. When the time is right, you’ll want to create a plan for your finances that suits you. It may mean you change jobs or move to a new home. To create a plan, you take stock of where you are now and look at your income and your living expenses. If you’re living on less than what you’re making—great! Otherwise you’ll need to scale back. Then, look at what sources of income you’ll have when you retire. This may include Social Security, pensions and other retirement accounts, as well as savings. A financial planner can help you estimate future medical expenses, determine when to start collecting Social Security, and when to withdraw from various retirement accounts. The National Association for Personal Financial Planners and the Alliance of Cambridge Advisors are two organizations whose members offer fee-only planning. It might make sense to contact a member near you to set up a financial review that could give you peace of mind now and a guide to help for full planning later when you’re ready to take that step.
Beware of Scams! Shortly after my dad died my mother was the target of a terrible scam by a con artist who preyed on widows. He called her, identifying himself as on officer of the court, and told her she had missed her assigned jury duty. When she said she didn’t know anything about it he treated her horribly, saying she was obviously trying to get out of her civic duty. When she became upset, he told her he would try to have the warrant for her arrest cancelled but would need her full legal name, date of birth and Social Security number. She gave it to him and now is a victim of identity theft. What a mess! Don’t give money or personal information to ANYONE.
Don’t turn your financial future over to your children. It is a big mistake to let your kids take over your finances. Count on them for emotional support, but not financial advice. My sister turned all financial decisions over to her son, who had no expertise. He made unwise investments and she also ended up paying more in taxes than she would have with a qualified financial adviser.
Read other member suggestions or add your own comment about financial planning for widows. Boomerater is an online resource for baby boomers, with local directories to help you find everything from an Atlanta financial advisor to Texas assisted living. The site also contains forums where boomers can post questions and swap first-hand experiences. If there are questions on your mind that you would like answered by other people who have faced similar situations, or you have advice of your own to share, go to Boomerater.com and participate in the forums. Say that The Best Life sent you.
To U.S. and World Report Site:
http://www.usnews.com/money/blogs/the-best-life/2009/09/14/four-financial-tips-for-widows.html
Tags: beware of scams, don't rush into anythingh, Widows
Posted in Financial Advisor, Widows, financial education | No Comments »
November 3rd, 2009
Jane M. Young, CFP, EA
As I mentioned in the previous article on Roth IRAs, with a Roth IRA you pay income tax now and not upon distribution. With a traditional IRA you defer taxes today and pay income taxes upon deferral. When you convert a Traditional IRA to a Roth IRA you must pay regular income taxes on the amount that is converted. The advisability of converting to a Roth depends on the length of time you have until you take distributions, your tax rate today and your anticipated tax rate upon retirement and your projected return on your investments.
When you run your numbers through one of the numerous calculators available on the internet you may or may not see a big savings in doing a Roth Conversion. However, there are several other factors that may tilt the scale toward converting some of your money to a Roth.
• Income tax rates are currently very low and there is a general consensus that they will increase considerably by the time you start taking distributions. With a Roth conversion you pay the tax now at the lower rates and take tax free distributions when the tax rates are higher.
• The stock market is still down about 25% from where it was in August of 2008. There is a lot of cash sitting on the sidelines waiting to be invested once consumer confidence is restored. You can pay taxes on money in your traditional IRA while the share prices are low and take a tax free distribution from your Roth down the road when the market has rebounded.
• You may have a sizable portion of your portfolio in tax deferred retirement accounts on which you will have to take required minimum distributions (RMD). This could put you into a much higher tax bracket. By converting some of your traditional IRA into a Roth you can get some tax diversification on your portfolio. This will lower your RMD– because there is no RMD on a Roth IRA. Diversifying your portfolio between a traditional IRA and a Roth IRA enables you to take your distributions from the most appropriate pot of money in any given year.
For more information on Roth IRAs and the new tax laws for 2010 please review the articles previously posted under Roth IRAs.
Tags: asset allocation, Investments, IRA, retirement, roth conversion, Roth IRA, stock market, tax planning, tax savings, Taxes
Posted in Retirement planning, Roth IRA, Taxes | No Comments »
August 25th, 2009
Jane M. Young CFP, EA
Frequently people talk about how everything is different and we should change the way we invest. Yes, we have just experienced a very difficult year with some major changes in our economic situation. However, every time we go through a major market adjustment if feels like “this time is different”. We could take numerous comments made at the end of the last bear market and insert them into today’s headlines without missing a beat. I call this the “recency effect”; bad times always feel more desperate while we are experiencing them. We need to step back and look at the big picture; don’t throw the baby out with the bathwater. Good, sound investment fundamentals are still valid. Some people may reassess their tolerance for risk, start saving more money or cut back on their discretionary spending - but the following investment principals are good, time tested guidelines that everyone should follow in any market.
1. Don’t time the market - The stock market is counter-intuitive. Generally, it may be better to invest when things seem most dire and sell when everything is rosy. It is impossible to predict the movement of the stock market and history shows that those who do frequently miss out on big upswings.
2. Dollar Cost Average - This enables you to invest a set dollar amount every month or every quarter regardless of what the market does. As a result you buy more shares when the price is low and fewer when the market is high. Dollar cost averaging helps you mitigate risk because we don’t know what the stock market is going to do tomorrow.
3. Maintain at least 3 to 6 months of expenses in an emergency fund - This is especially important in difficult financial times when stock market values are low and unemployment is high. Unless you have a very secure job I currently recommend a 6 month emergency fund.
4. Don’t invest in anything you don’t understand - If you just can’t get your head around something after it’s been explained or you have done a reasonable amount of research don’t invest in it. If an investment opportunity is overly complicated something may be rotten in Denmark.
5. Don’t Chase Hot Asset Classes - Today international funds may be skyrocketing and tomorrow it may be small cap domestic stock funds. Don’t forget what happened to the stock market after the dot.com bubble burst.
6. Diversify, Diversify, Diversify - Everyone needs to diversify with a mix of fixed income and equity investments that is consistent with their own unique investment goals and objectives. Although most stocks dropped in unison over the last year, I still think there is value in diversifying between different types of stock mutual funds. I believe we will see some categories of stocks outpace others as the market rebounds. Depending on your risk tolerance, a small allocation in commodities and real estate may be advisable.
7. Don’t Make Emotional Decisions - Many investment decisions are triggered by fear and greed and they are equally damaging. Don’t make rash decisions based on emotion. Remember the stock market is counter-intuitive.
8. Don’t put more than 5% of your assets in one security – Any given company can go bankrupt as we have seen with many financial and automobile firms over the last year. I encourage the use of mutual funds over individual stocks to help mitigate this type of risk. If you do invest in individual stocks don’t put too much faith in any one company. If you are investing in your own company and you have a strong understanding of the firm’s performance you could go up to 10%.
9. Be tax smart - Take advantage of tax advantaged retirement plans such as Roth IRAs and 401k plans. Consider tax consequences when re-balancing your portfolio. Use a bear market to harvest some tax losses and off-load some bad or inappropriate investments.
10. Be aware of fees and surrender charges - When selecting investments be aware of high fees and commissions. Tread cautiously with anything that contains a contingent deferred sales charge. Many clients have come to me with a desire to sell or transfer previously purchased investments, usually annuities, only to find they have a 5-10% surrender charge if they sell within ten years of purchase. A surrender charge can have a big impact on your flexibility. If you really want a variable annuity buy one with low fees and no surrender charges.
Tags: asset allocation, asset classes, commissions, diversify, dollar cost averaging, emergency fund, fear, fees, greed, investment principals, Investments, IRA, market timing, re-balancing, risk tolerance, stock market, surrendercharges, Taxes
Posted in Investments, financial education | 1 Comment »
August 18th, 2009
Jane M. Young CFP, EA
I know this is a subject we don’t want to think about but the reality is most wives will out live their husbands. We plot and we plan all kinds of cash flow scenarios for couples to live happily ever after until they fall gently asleep in each others arms at age 100. That would be nice but life isn’t quite so predictable. Therefore as a wife, you should plan to out live your husband. This includes being ready to handle all of the arrangements and paperwork that must be handled upon death as well as long term planning for your financial needs. Below is a list of issues that should be addressed before you become a widow.
• Select an Estate Planning Attorney who you trust and are comfortable with to draft a will and help you through the process of settling your husband’s estate.
• Draft a will and a Health Power of Attorney.
• Discuss end of life plans with each other.
• Review the beneficiary designations on IRAs, 401ks, and life insurance policies.
• Organize your financial papers so you know what you have, where you have it and who your contact is.
• Take an active role in managing your finances.
• If you are uncomfortable with finances, take some classes and read some books to educate yourself.
• If you choose to work with a Financial Planner take the time to select someone who you trust and feel comfortable with – especially when you are alone. The National Association of Personal Financial Advisors provides some good guidelines on selecting a financial planner at www.Napfa.org.
• Run some retirement planning scenarios as a widow – will you have enough money to cover your expenses if you husband predeceases you? Are you still entitled to his pension or will you receive a decreased payout?
• Does your cash flow fall short of what you need? Consider buying some term life insurance? Consider adjusting your work situation to save more money?
• What happens if one of you needs long term care? Can you cover the expense or should you consider long term care insurance?
• What happens to your health insurance when your husband dies? How much time do you have to secure health insurance in your name? Are you entitled to Cobra?
• Establish credit in your name, get your own credit card.
• Do you have adequate emergency reserves to cover funeral expenses and several months of expenses?
The loss of a spouse is extremely difficult. Most widows feel like they are in fog for the first year. The last thing on your mind will be money but some issues will need to be addressed. Make it easier on yourself and plan ahead.
Tags: beneficiaries, cash flow, comprehensive financial planning, estate planning, finances, financial issues for women, married women, NAPFA, retirement, Retirement planning, Selecting a financial planner, Widows, wills
Posted in Financial planning, Uncategorized, Widows, financial education | No Comments »
August 13th, 2009
Jane M. Young CFP, EA
1. Start by re-evaluating your monthly expenses to determine how much money you need for necessary expenses. Then determine how much you have remaining after you cover these expenses.
2. During difficult economic times, like the present, most people should maintain an emergency fund of at least 6 months of expenses. If you have an exceptionally secure job you may be able to drop it down to 3 months. Always be sure to sure to maintain an adequate emergency fund.
3. Once your emergency fund is established pay off any high interest credit cards.
4. Put aside money for special one time expenses such as a new roof, a new car or a down payment on a house. If you don’t own your own home give some serious consideration to saving up to buy one. Decide how much you want to save on a monthly basis and start a systematic savings plan.
5. Now you can start investing! Determine how much you can afford to invest on a monthly basis. Most people should start by investing in their company retirement plan up to the level that the company will match. If you can afford to invest beyond the level of your company match, invest up to the maximum allowed in a Roth IRA. This should be done on a monthly basis to take advantage of dollar cost averaging - investing the same amount every month. The 2009 contribution limit for a Roth IRA is $5,000 if you are under 50 and $6000 if you are over 50. There is an income limit on your eligibility to contribute to a Roth IRA based on your adjusted gross income. For 2009, your eligibility to contribute begins to phase-out at $166,000, if you are married filing jointly and $105,000 if you are single.
If you still have money to invest after maximizing your Roth IRA, resume contributing to your company retirement plan up to the maximum amount. The maximum contribution limit for a 401k in 2009 is $16,500 if you are under 50 and $22,000 if you are over 50.
Invest your money in a diversified set of mutual funds. Establish an asset allocation consistent with your timeframe and risk tolerance. For most individuals this will vary from 50% to 80% in stock mutual funds, with the balance in fixed income investments. The market is still priced very low and it is a great time to buy stock mutual funds. However, the market will be very volatile over the next 6 – 9 months. Dollar cost averaging into your retirement plans will help you take advantage of this volatility.
This is very general advice and everyone’s situation is unique. Treat this advice as a general guideline and adapt it to your own situation or consult a Certified Financial Planner for guidance.
Tags: 401k, asset allocation, credit cards, dollar cost averaging, emergency fund, Investing, mutual funds, Roth IRA, saving
Posted in Financial planning, Investments | No Comments »
August 6th, 2009
Jane M. Young, CFP, EA
I work with several widows and one of their most pressing concerns is regarding social security benefits. Due to family responsibilities, many widows have not worked much outside the home and have little or no social security benefits based on their own earnings record. As a result, widow’s benefits are especially important to them.
As a widow or widower you are entitled to social security benefits based on the earnings record of your spouse. The amount you will receive is also based on your age. You are entitled to 100% of your spouses benefit at full retirement age or a reduced benefit at 60. If you are disabled you may begin receiving reduced benefits at 50. You can receive 75% of the benefit at any age if you are caring for your deceased spouse’s child who is under 16 or is disabled and receives benefits under your spouse’s record.
What if you remarry?
If you remarry before 60 you are not entitled to the survivor benefits as long as you remain married. If you remarry after 60 you will be entitled to survivor benefits. You may want to file for wife’s benefits if your new spouse’s benefits are higher than the widow’s benefits. Sorry, you aren’t entitled to both.
What if you work?
Prior to full retirement your survivor benefits will be decreased by $1 for every $2 dollars earned above the earnings limit. The limit for 2009 is $14,600. After full retirement there is no limit on earnings.
What if you have your own earnings record?
You can file for Social Security under your own earnings record or under your deceased spouse’s record – whichever is larger. However, again you can’t get both. You can begin receiving widow’s benefits at a reduced rate at age 60 and switch to your own benefit at full retirement at an unreduced rate.
Social Security rules can be complicated and vary depending on your specific circumstances. I encourage you to contact Social Security to make an appointment with a representative when you are within a year of receiving benefits 1-800-772-1213. More information is available on the official social security web page www.socialsecurity.gov.
Tags: retirement, social security, survivor benefits, Widow, Widow's benefits
Posted in Widows, social security | No Comments »
July 25th, 2009
Jane M. Young, CFP, EA
The primary difference between a Traditional IRA and a Roth IRA is when you pay income tax. A traditional IRA and a traditional retirement plan are funded with pre-tax dollars and you pay taxes on your withdrawals. A Roth IRA is funded with after tax dollars and you don’t pay taxes on your withdrawals. The decision to buy a Roth or a Traditional IRA is largely based on your current and future tax rates, your investment timeframe and your investment goals. The Roth IRA is usually the more advantageous of the two options but it depends on your individual situation.
Traditional IRA: (tax me later)
• Funded with pre-tax dollars therefore it provides a current tax deduction
• Earnings are tax deferred
• Distributions taxed at regular income tax rates, penalty if withdrawn before 59 1/2
• Required minimum distributions must be taken beginning at age 70 1/2
• Income limit on contributions begins at, if participant is in a retirement plan, $89,000 MFJ and $55,000 if single.
• Annual contribution limit is $5000 if under 50 and $6000 if over 50
• Many IRAs are created as a result of a rollover from a company retirement plan such as a 401k – very similar in tax structure.
Roth IRA: (tax me now)
• Funded with after tax dollars, does not provide a current tax deduction
• Earnings tax exempt (after five years or 59 ½)
• Contributions can be withdrawn penalty and tax free
• Earnings can be withdrawn tax free after five years or 59 1/2
• No required minimum distribution
• Income limit on contribution begins at $166,000 MFJ and $105,000 if single
• Annual contribution limit is $5000 if under 50 and $6000 if over 50
Part III of this series will address the pros and cons of converting a Roth IRA to a Traditional IRA.
Tags: 401k, Investments, IRA, Required Minimum Deduction, retirement, roth conversion, Roth IRA, tax deductions, tax planning, tax savings, wealth building
Posted in Roth IRA | No Comments »
July 24th, 2009
Jane M. Young, CFP, EA
Beginning in January 2010 the income limit of $100,000 AGI (adjusted gross income) on converting a traditional IRA to a Roth IRA will be lifted. This is a huge opportunity for many who have been unable to contribute to a Roth or convert to a Roth due to income restrictions. Normally, when one converts a traditional IRA to a Roth IRA the amount converted is added to gross income in the year of conversion. However, for conversions made in 2010 the government is allowing you to spread out the payment of taxes over the 2011 and 2012 tax years.
Why should you care about this now, prior to 2010? There are several things you can do to prepare for this opportunity. This is a great time to fund your traditional IRA, non-deductible traditional IRA or your 401k plan, if you are planning to retire or change companies soon, in anticipation of converting it to a Roth in 2010. You will need cash to pay the taxes associated with converting to a Roth IRA, so you should be incorporating this additional need for liquidity into your financial planning today.
This is the first in a series of postings on Roth IRAs and Roth IRA conversions.
Tags: 401k, Investments, IRA, retirement, Roth IRA, tax planning, tax savings, wealth building
Posted in Roth IRA | No Comments »
July 21st, 2009
http://www.napfa.org/consumer/ConsumerWebinarSeries.asp
Tags: financial education, NAPFA, personal finance
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June 17th, 2009
http://www.smartmoney.com/Investing/Basics/10-Things-Your-Financial-Planner-Wont-Tell-You/?page=4
Tags: Add new tag, advocate, comprehensive financial planning, consumer protection, Fee-only, Financial Advisor, financial services, saving money, selecting a financial planning
Posted in Financial Advisor, Selecting a Financial advisor, Uncategorized, financial education | No Comments »
June 16th, 2009
Jane M. Young, CFP, EA
1. No required minimum distribution in 2009 for IRA, 401k, 403b, 457b, 401k and profit sharing plans. This does not apply to annuitized defined benefit plans.
2. If you are older than 70 ½, in 2009 you can make charitable gifts from your IRA without the payment being included in your adjusted gross income. The distribution must be a “qualified charitable distribution”, which means it must be made directly from the IRA owner to the charitable institution. This is especially beneficial if you claim a standard deduction and were unable to deduct charitable contributions by itemizing.
3. Beginning in 2010 individuals earning over $100,000 in modified adjusted gross income will be able to convert traditional IRAs to Roth IRAs. Modified adjusted gross income is the bottom line on the first page of the 1040 tax form. Income from a conversion in 2010 may be reported equally over 2011 and 2012.
While there are many benefits to converting from a traditional IRA to a Roth IRA the conversion will increase your adjusted gross income (AGI) which can have some unintended consequences. An increase in AGI may impact the taxability of your social security, phase-outs on itemized deductions, education and your tax bracket.
I will write more about Roth IRA conversions in a future blog.
Tags: distribution planning, Investments, IRA, required minimum distribution, retirement, Retirement planning, roth conversion, Roth IRA, tax savings
Posted in retirement plans | No Comments »
June 2nd, 2009
Jane M. Young, CFP, EA
I have decided to focus on a topic that is near to my heart and for which I have a great deal of first hand experience. Although in some cases you should do as I say and not as I do. I have a terrible weakness for European cafés and therefore spend too much money on meals and wine. We must choose our battles.
1.) Take the time to research air fares; it helps to be flexible on dates, times and locations. On my last trip we were able to save about $500 by trying a wide variety of routes and destinations – all within southern France. It is generally much cheaper to travel in and out of the same city and to book round trip tickets. If you need to travel one way within Europe there are several low cost, regional, airlines. If you don’t have too much luggage, consider a high speed train. I found train travel to be easy, fun, inexpensive and reliable. However, it can be difficult with a lot of luggage. It’s great for a day trip!
2.) Avoid travel during peak season, June through August. I usually travel in May or September to avoid the huge summer crowds and get better prices. Most hotels charge higher rates during the peak summer months. The service is also much better when there are fewer people to deal with. I also found that several historical sites don’t charge admission until June 1st.
3.) Save money by eating fewer meals in restaurants. Buy some bread, wine and cheese at the local grocery store and have a picnic in the park or at the beach. Reserve a hotel with a refrigerator to keep food fresh for breakfast and snacks. Most hotels offer breakfast but it can be very expensive, pick-up a baguette or a sandwich on the go and eat it as you stroll through the city. If you are limited for time, eating all your meals in a restaurant can use up a lot of valuable time.
4.) Save money when eating in restaurants by ordering the special of the day, sharing a meal or eating the seasonal local specialties. You can also save money by ordering the fixed price menu. If you are traveling to several towns in a region eat in the smaller less touristy villages. In addition to being less expensive, the food is better and the proprietors are more open. Seek out restaurants that are off the beaten path or ask a local for a restaurant recommendation. The prices will be lower, the food will be better and the ambiance will be nicer. You can eat with the Americans at home.
Save on wine by ordering a half liter or small pitcher of house wine. Most restaurants in France and Italy serve a half liter of house wine for about 5 euros; it’s the best deal going. The house wine is usually produced locally, many restaurants serve only regional wines. As they say, when in Rome….
5.) Take the time to research your lodging. You can save on lodging by staying in lesser know towns and staying in small locally owned Inns or Hotels. If you have the time, book an apartment for a week or two and take days trips from your base location. Another great way to save money is booking a business hotel over the weekend or a holiday; this can be especially helpful for airport locations.
There are several internet sites that can help you select good quality, inexpensive hotels such as Tripadvisor.com and Hotels.com. You can read reviews written by the people who have recently stayed there. A good guidebook on the region you are visiting can also be very helpful in selecting a hotel. Check out your selection with several sources to make sure the reviews are consistent.
6.) Think about what site-seeing you plan to do and what is really important to you. Admission into museums and various historical sites can be very expensive. When you visit cities with several sites that you want to see ask the tourist office if there is a museum pass or some kind of package deal that you can purchase. Be selective on what you pay to see – the inside of one mid-evil castle looks about the same as the next. You have limited time and there is so much beautiful scenery and architecture available to see absolutely free.
Tags: air fare, budgeting, cash flow, european travel, france, save money, savings, spending, travel
Posted in budgeting | No Comments »
May 5th, 2009
FOR IMMEDIATE RELEASE Contact: Benjamin Lewis
Perception, Inc.
(301) 963-7555
With a few basic questions, consumers can find out if
their best interests are being protected by their advisor.
ARLINGTON HEIGHTS, IL (April 22, 2009) – As the events of the last several months have made clear, it’s never been more important for consumers to act in their own best interests when working with a financial advisor. Consumers must ask the right questions when selecting an advisor, AND they must keep asking questions on a regular basis.
The National Association of Personal Financial Advisors (NAPFA) has been a vocal advocate for the consumer for more than 25 years and is currently working with other industry organizations, congressional leaders and regulators to encourage increased protection for consumers However, even if new reforms are put in place, NAPFA encourages consumers to protect themselves by being proactive when establishing or engaging in an ongoing relationship with a financial advisor.
Regardless of which advisor is chosen, a consumer needs to ask the following questions:
- Do you work with an independent custodian? Whether your advisor is managing your money or you are the person who signs off on each financial decision, your advisor should not be holding your money. Your money should be held by an independent custodian company. Make sure you know the name of the company; how to contact the company; and your account numbers. Be sure to open and review your monthly statements and check on the accuracy of any trades and withdrawals in your accounts.
- Will I be able to review all transactions that are made? When you receive your statements, be sure you carefully look at all transactions. Make sure you understand each purchase, sale, deposit and withdrawal and why it was made. If you have a question concerning a transaction, call your advisor immediately. If you aren’t satisfied with the answer you receive, call the custodian directly.
- Will I be able to make checks payable to the custodian? When making a deposit to your investment account, write the check to the custodian, not to your advisor. Be careful of advisors who ask that checks to be made out to them.
- Do you require a General Power of Attorney? The General Power of Attorney document will allow your advisor to remove money from your accounts without your special consent. Typically a Limited Power of Attorney, which allows the advisor to make trades on your behalf, is preferred. You may want to discuss your personal situation with an attorney.
- Can I have copies of statements sent to a family member? If you don’t understand your statements, tell your advisor to send copies to a family member or another professional who can help you.
- Stay in contact with your advisor. Visit with your advisor at least annually, and stay in contact by e-mail or telephone. If your advisor is vague or evasive, ask for more information. Holding these regular meetings has the added benefit of making sure that you and your advisor are clear about your financial goals, risk tolerance, and investment strategy. In fact, poor communication between client and advisor is a more common source of dissatisfaction than any type of illegal activity.
“It is not good enough today to simply judge a financial advisor based on what you read on his or her website or in a brochure. You need to speak with them,” said Diahann W. Lassus, CFP®, CPA/PFS, national chair of NAPFA. “Advisors who are going to act in your best interests will be forthright and honest about how they operate and will truly act in a fiduciary capacity at all times.”
Consumers who are still unsure after talking with an advisor should review the advisor’s Form ADV, which is always available upon request. Additional information about a firm may be found on the Securities and Exchange Commission’s Central Registration Depository website at http://www.sec.gov/answers/crd.htm.
To obtain a longer list of questions to ask an advisor, use the Financial Advisor Diagnostic, developed by NAPFA. The Diagnostic is available for free at http://www.napfa.org/tips_tools/index.asp.
“Consumers who take the time to ask the right questions and do the necessary research will ultimately become smarter consumers of financial services,” said Ms. Lassus.
If you are interested in discussing consumer protection, please contact Benjamin Lewis at (301) 963-7555 or Benjamin.lewis@perceptiononline.com.
About NAPFA
Since 1983, The National Association of Personal Financial Advisors (NAPFA) has provided Fee-Only financial planners across the country with some of the strictest guidelines possible for professional competency, comprehensive financial planning, and Fee-Only compensation. With more than 2,200 members across the country, NAPFA has become the leading professional association in the United States dedicated to the advancement of Fee-Only financial planning.
For more information on NAPFA, please visit www.napfa.org.
Tags: Add new tag, advocate, comprehensive financial planning, consumer protection, Fee-only, Financial Advisor, financial services, NAPFA
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May 2nd, 2009
Jane M. Young, CFP, EA
Whew!! The 2008 tax season is finally over and we can relax. Well not exactly; this is a great time to prepare for 2009 taxes. A little effort now can help you save in 2009 and will make the process a whole lot smoother. Below are some ideas to help save taxes in 2009.
1. Create a folder for your 2009 tax documents and receipts. Create a file right now, and keep it somewhere convenient, to keep track of all those expenses and donations as they occur.
2. Start going through your old clothes and junk in the garage and donate it to a charity of your choice, if you itemize this can provide a sizable deduction. Remember, keep a log of everything you donate and get a receipt!
3. If you anticipate a substantial change in your 2009 income or if you owed a lot in 2008, now is the time to adjust your withholdings or your estimated payments. There is nothing worse than owing an unexpected $5000 at the end of the year.
4. Maximize your contribution to tax deferred retirement plans. Limits on the 401k, Simple and SEP have all increased this year. If you turned 50 this year you can now make catch-up contributions to your retirement plans including your IRA (assuming you are otherwise qualified).
5. Do you anticipate a decrease in income this year? You may be eligible to contribute to a Roth IRA or for a conversion from a Roth IRA to a traditional IRA. The recent drop in the stock market has made conversion to a Roth IRA very appealing. You can pay income taxes on your account now, while the balance is low. Then during retirement, when the market has recovered, you can take tax free withdrawals. In 2009 your AGI must be less than $100,000 to be eligible for a conversion.
6. Will you be paying college expenses sometime soon? If you live in Colorado you can invest the money you will be spending on college expenses in a 529 plan and deduct the contribution from your state income tax. If you have a couple kids in college this can be significant. Don’t worry; you can invest the money in something very safe within the 529 if you are worried about market volatility.
7. If you are a first time homeowner you may be eligible for a 10% credit up to $8000 if you buy a home by December 1, 2009. This is really more like an interest free loan because it must be paid back over 15 years. Additionally, it is subject to income limits. The credit begins to phase-out for joint filers with modified adjusted gross income of $150,000 or more.
8. Are you thinking about buying a new car? You may be able to deduct the sales and local tax if you buy the car this year. This is subject to an income phase out if your adjusted gross income exceeds $125,000. I know they take all the good stuff away from middle class wage earners.
9. If you own a business or work as a consultant, be sure to keep accurate and complete records. Don’t forget to track your mileage, the current deduction for business mileage is $.55 per mile. This is frequently overlooked or understated due to poor record keeping. Additionally, if you work in your home and have a dedicated work area you may want to claim a home office deduction.
10. Take advantage of the drop in the stock market to do some tax harvesting. Tax harvesting is taking advantage of a market decline to sell some of the dogs in your investment portfolio while taking a capital loss or reduced capital gain. Prior to the market drop, the sale of a particular security may have been prohibitive due to capital gains. Now you can take advantage of the drop in the market to clean up your portfolio or do some re-balancing of your asset allocation.
Tags: 401k, 529, Add new tag, colorado, donations, goals, home office deduction, mileage, receipts, retirement plans, Roth IRAras, save money, saving, tax credit, tax harvesting, Taxes
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April 28th, 2009
Jane M. Young, CFP, EA
1. When grocery shopping, select items from the lower shelves, the more expensive items are usually placed at eye level.
2. Stock up when durable goods that you always need go on sale. Don’t buy something you wouldn’t otherwise buy just because it’s on sale.
3. Reduce impulse purchases at the grocery store – go less frequently, make a list and eat before you go. I know, I know, those strawberry shortcake cookies, with the cream filling and chocolate swirls looked so good. But a few days later …… what was I thinking??
4. When comparing prices check the unit price not the total price. You may pay less but you are probably getting less for your money.
5. Eat smaller portions of meat – you might even lose a little weight. Meat is very expensive, use more vegetables and less meat in you recipes.
6. When eating out, eat half of your meal at the restaurant and take the rest home with you. Most restaurants serve very large portions.
7. When eating out limit yourself to one glass of wine or drink tap water instead of coffee, tea or soda. Beverages can be very expensive relative to the cost your food.
8. If you are having an entrée avoid ordering appetizers or desert at the restaurant. Have drinks and appetizers at home before you leave or coffee and desert at home after dinner.
9. Eat something at home before you go out to meet friends. Limit your order to an appetizer or a side salad to be sociable.
10. Rather than celebrating at a restaurant, organize a potluck or take turns hosting a dinner party.
Tags: budget, budgeting, cash flow, expenses, goals, money, saving, saving money
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