All about IRAs

An individual retirement arrangement (IRA) is a personal retirement savings plan that offers specific tax benefits. In fact, IRAs are one of the most powerful retirement savings tools available to you. Even if you’re contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.

What types of IRAs are available?

There are two major types of IRAs: traditional IRAs and Roth IRAs. Both allow you to make annual contributions of up to $5,500 in 2017 (unchanged from 2016). Generally, you must have at least as much taxable compensation as the amount of your IRA contribution. But if you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional “catch-up” contributions. These folks can put up to $6,500 in their IRAs in 2017 (unchanged from 2016).

Both traditional and Roth IRAs feature tax-sheltered growth of earnings. And both give you a wide range of investment choices. However, there are important differences between these two types of IRAs. You must understand these differences before you can choose the type of IRA that’s best for you.

Traditional IRAs

Practically anyone can open and contribute to a traditional IRA. The only requirements are that you must have taxable compensation and be under age 70½. You can contribute the maximum allowed each year as long as your taxable compensation for the year is at least that amount. If your taxable compensation for the year is below the maximum contribution allowed, you can contribute only up to the amount you earned.

Your contributions to a traditional IRA may be tax deductible on your federal income tax return. This is important because tax-deductible (pretax) contributions lower your taxable income for the year, saving you money in taxes. If neither you nor your spouse is covered by a 401(k) or other employer-sponsored plan, you can generally deduct the full amount of your annual contribution. If one of you is covered by such a plan, your ability to deduct your contributions depends on your annual income (modified adjusted gross income, or MAGI) and your income tax filing status. You may qualify for a full deduction, a partial deduction, or no deduction at all.

What happens when you start taking money from your traditional IRA? Any portion of a distribution that represents deductible contributions is subject to income tax because those contributions were not taxed when you made them. Any portion that represents investment earnings is also subject to income tax because those earnings were not previously taxed either. Only the portion that represents nondeductible, after-tax contributions (if any) is not subject to income tax. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you’re under age 59½, unless you meet one of the exceptions.

Individuals Covered by an Employer Plan
Filing status Deduction is limited if MAGI between: No deduction if MAGI over:
Single/Head of household $62,000 – $72,000 $72,000
Married joint* $99,000 – $119,000 $119,000
Married separate $0 – $10,000 $10,000
* If you’re not covered by an employer plan, but your spouse is, your deduction is limited if your MAGI is $186,000 to $196,000, and eliminated if your MAGI exceeds $196,000.

If you wish to defer taxes, you can leave your funds in the traditional IRA, but only until April 1 of the year following the year you reach age 70½. That’s when you have to take your first required minimum distribution from the IRA. After that, you must take a distribution by the end of every calendar year until your funds are exhausted or you die. The annual distribution amounts are based on a standard life expectancy table. You can always withdraw more than you’re required to in any year. However, if you withdraw less, you’ll be hit with a 50% penalty on the difference between the required minimum and the amount you actually withdrew.

Roth IRAs

Not everyone can set up a Roth IRA. Even if you can, you may not qualify to take full advantage of it. The first requirement is that you must have taxable compensation. If your taxable compensation is at least $5,500 in 2017 (unchanged from 2016), you may be able to contribute the full amount. But it gets more complicated. Your ability to contribute to a Roth IRA in any year depends on your MAGI and your income tax filing status. Your allowable contribution may be less than the maximum possible, or nothing at all.

Filing status Contribution is limited if MAGI between: No contribution if MAGI over:
Single/Head of household $118,000 – $133,000 $133,000
Married joint $186,000 – $196,000 $196,000
Married separate $0 – $10,000 $10,000

Your contributions to a Roth IRA are not tax deductible. You can invest only after-tax dollars in a Roth IRA. The good news is that, if you meet certain conditions, your withdrawals from a Roth IRA will be completely free from federal income tax, including both contributions and investment earnings. To be eligible for these qualifying distributions, you must meet a five-year holding period requirement. In addition, one of the following must apply:

  • You have reached age 59½ by the time of the withdrawal
  • The withdrawal is made because of disability
  • The withdrawal is made to pay first-time homebuyer expenses ($10,000 lifetime limit from all IRAs)
  • The withdrawal is made by your beneficiary or estate after your death

Qualified distributions will also avoid the 10% early withdrawal penalty. This ability to withdraw your funds with no taxes or penalty is a key strength of the Roth IRA. And remember, even nonqualified distributions will be taxed (and possibly penalized) only on the investment earnings portion of the distribution, and then only to the extent that your distribution exceeds the total amount of all contributions that you have made.

Another advantage of the Roth IRA is that there are no required distributions after age 70½ or at any time during your life. You can put off taking distributions until you really need the income. Or, you can leave the entire balance to your beneficiary without ever taking a single distribution. Also, as long as you have taxable compensation and qualify, you can keep contributing to a Roth IRA after age 70½.

Choose the right IRA for you

Assuming you qualify to use both, which type of IRA is best for you? Sometimes the choice is easy. The Roth IRA will probably be a more effective tool if you don’t qualify for tax-deductible contributions to a traditional IRA. However, if you can deduct your traditional IRA contributions, the choice is more difficult. Most professionals believe that a Roth IRA will still give you more bang for your dollars in the long run, but it depends on your personal goals and circumstances. The Roth IRA may very well make more sense if you want to minimize taxes during retirement and preserve assets for your beneficiaries. But a traditional deductible IRA may be a better tool if you want to lower your yearly tax bill while you’re still working (and probably in a higher tax bracket than you’ll be in after you retire). A financial professional or tax advisor can help you pick the right type of IRA for you.

Note:You can have both a traditional IRA and a Roth IRA, but your total annual contribution to all of the IRAs that you own cannot be more than $5,500 in 2017 ($6,500 if you’re age 50 or older).

 

 

Securities offered through FSC Securities Corporation, member FINRA / SIPC . Investment advisory services offered through The Retirement
Group, LLC, a registered investment advisor which is not affiliated with FSC Securities Corp. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose
of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her
individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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A Business Plan Can Be Your Guide to Growth

Whether you’re a current business owner or a budding entrepreneur burning with the next great idea, one of the most important steps you can take on your road to success is creating a business plan. Why? A well-thought-out and well-written business plan captures your vision, illustrates it for others (including potential lenders and investors), and creates the roadmap you and your management team need to guide you through the growth of your business. Consider the following points:

  • If you’re a current business owner, you probably feel like you’re always working to close the next big deal, juggling financials, or responding to the latest crisis. Remember, however, that it’s important to periodically climb out of the trees and take a good, hard look at the forest. A business plan can help you do just that: take stock of where you’ve been and lay the groundwork for where you’re headed.
  • If you’re a budding entrepreneur, a business plan can help you raise money. It will help prove to potential investors and lenders that your idea is worth funding.
  • For both current and potential business owners, the process of creating a business plan can prove beneficial by revealing potential risks and uncovering opportunities that may not otherwise be apparent.

A business plan should be comprehensive, yet as concise as possible. Although there are no limits to the length, a business plan should respect the time of your readers while providing the information they need to make important decisions. Before you begin writing, consider contacting an attorney or business consultant with expertise in business plan writing. Following are some of the main components of a business plan.

Cover page and table of contents

The cover page is simply a title page for your business plan document. It should include the name of the company, address, phone number, owners’ names, and contact information. It should also include the date on which the document was finalized and published. The table of contents helps readers navigate through the document and identifies page numbers for each of the sections.

Executive summary

The executive summary is essentially your elevator pitch–an abridged version of the business plan that describes to readers why your business is worthy of their attention and possibly their money. It should be no longer than one page, but should contain all pertinent details. For this reason, it is often easier to write this section last.

An executive summary should answer readers’ primary questions–i.e., are you looking for funding, is the document a strategic guidebook for management, or both? As you draft your executive summary, keep in mind that many readers will decide whether the subsequent pages are worth reviewing based on this important section.

Business description

The business description is the first major section of your business plan and should provide more details on the nature of your business. One paragraph should outline the key elements of your business, and then subsequent paragraphs might expand on each. These elements should include:

Product or service description

Describe in detail the product sold or service provided. If you are producing a product, explain how the product is manufactured. What materials are used? Who are your suppliers? What are the costs of production? If you provide a service, describe what it is and why it is different. How will it be provided? In this section, you might also address potential pitfalls and how they will be addressed. For example, if demand for your product or service is higher than expected, how will you manage the volume?

Legal structure

Business entities come in a wide variety of legal structures, ranging from sole proprietorships and partnerships to corporations. Each has its own pros and cons. In this section of the business plan, you’ll need to describe the entity you selected and the reasons for your decision. Include supporting documentation (e.g., a partnership agreement).

Business and industry description

Who are your key advisors and managers, and how does their experience benefit your organization? Where are you located and why did you choose this location? You might also want to use this section to describe the genesis of your business–i.e., how and why you decided to launch the venture. Provide details on the industry you are in and why your business has a competitive edge. Include relevant data and illustrations, if applicable. (For example, a retail establishment might include a map highlighting strong pedestrian traffic patterns in the area.)

Market analysis and marketing strategy

Perhaps the most influential section of your business plan, the market analysis and marketing strategy sections are where you convince readers that your business will be successful.

The market analysis section should provide a specific and detailed analysis of your target market, including what you have done to maximize your opportunity within it. Who are your current and potential customers, and why? Summarize any market research you have conducted to prove the viability of your business. How big is your potential market? Who are the major competitors?

If your business plan is intended for potential investors or lenders, this section will help convince them that you truly understand your market and are an expert in your industry. If your plan is primarily designed to educate key employees, it will provide the basic information they need to strategize and carry out your vision for growth.

Once you have conducted thorough market research, the next step is to brainstorm how you will market your product or service within your industry. This marketing strategy section of the business plan should provide details about how you will promote your products and services. How will you differentiate yourself from the competition within your target market? What is your business’s value proposition (i.e., the unique value your company offers the marketplace), and how will you communicate it to your stakeholders? Describe any marketing tactics, such as advertising and public relations, as well as sales models and sales compensation structures.

While the market analysis and marketing strategy sections may be the most time-consuming to put together, they will be well worth the effort. Conducting thorough market research can uncover previously unknown challenges and opportunities. Addressing these findings with a creative strategy can give your business a competitive edge. It can also help your business’s leadership team understand the reasons for certain strategic decisions you make that they may not necessarily agree with.

Financials

Of particular importance to potential investors and lenders, the financials portion of the business plan is designed to help your readers understand where you are now financially, and where you hope to be. If you are seeking money, this section should outline exactly how much you need and why. You should include all current and projected (or “pro forma”) financial statements, including:

  • Cash flow statement
  • Balance sheet
  • Income (or profit and loss) statement
  • Break-even analysis

This section will likely be scrutinized the most, so be sure it is completed carefully. Some readers will require more information than others. What is most important is that the information provided is accurate and well-supported with documentation. The main purpose of this section is to educate readers about the use of resources–including any debt and equity financing you hope to get–proving to them that you and your leadership team can and will manage money effectively.

Worth the effort

Most business owners would much rather focus on their daily objectives and challenges than take valuable time away from their business to write a business plan. But in the end, it will be worth the effort. A business plan is not only important, but it can also become a critical resource on your journey toward success. For more information, visit the Small Business Administration, www.sba.gov.

 

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not
specific to any individual’s personal circumstances. Securities offered through FSC Securities Corporation, member FINRA / SIPC . Investment advisory services offered through The Retirement Group, LLC, a registered investment advisor which is not affiliated with FSC Securities Corp.     To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose
of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her
individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Women and Money Paralysis

Not making a move may not be the best move to make.      

A decision not made may have financial consequences. There is an old belief that women are more cautious about money than men, and whether you believe that or not, both women and men may fall prey to a kind of money paralysis as they age – in which financial indecision is regarded as a form of “safety.”  

Retirement seems to heighten this tendency. If you are single, retired, and female, you may be extremely fearful of drawing down your retirement savings too soon; or investing in a way that would mean any kind of risk.

This is understandable: if you are over 80, you likely have memories of the Great Depression, and baby boomers have memories of the severe economic downturn of the late 2000s.

“Paralysis by analysis,” or simple hesitation, may cost you in the long run. Your retirement may last much longer than you presume it will – perhaps 30 or 40 years – and maintaining your standard of living will undeniably take some growth investing. As much as you may want to stay out of stocks and funds, they offer you a chance to out-earn inflation – a chance you forfeit at your financial peril.

Even minor inflation can subtly reduce your purchasing power over time. Of all the risks to quality of life in retirement, this is often the least noticed. Doing nothing about it – or investing in a way that avoids all or nearly all risk – may put you at greater and greater financial disadvantage as your retirement proceeds. 

Keeping a foot in the stock market – in whatever major or minor way you choose – allows your invested assets the potential to keep pace with or outpace inflation.

Retirement is the time to withdraw retirement assets. Some women (and men) are extremely reluctant to tap into their retirement nest eggs, even when the money has been set aside for years for a specific dream. Even though they have saved or dedicated, say, $20,000 for world travel, when retirement comes they may be skittish about actually using the money for that purpose. Buying a car to replace one that has been driven for 15 years, or remodeling part of the house to make it more livable after 70 or 80 may be viewed as extravagances. 

We cannot control how long we will live, how much money we will need in the future, or how well the economy will perform next year or ten years on. There comes a point where you must live for today. Pinching pennies in retirement with the idea that the great bulk of your savings is for “someday” can weigh on your psyche. What does your retirement dream amount to if you don’t start living it once you retire? 

If you fear outliving your money, remember that growth investing offers you the potential to generate a larger retirement fund for yourself. If you seek more retirement income, ask a financial professional about ways to arrange it – there are multiple ways to plan for it, and some that involve little risk to principal.

Don’t forget America’s built-in retirement insurance: Social Security. For every year you wait to claim Social Security benefits after your full retirement age (either 66 and 67 for most people) and age 70, your monthly payments grow by 8%. In contrast, if you start taking Social Security before your full retirement age, it will mean less SSI per month than if you had waited.1

The 4% rule may provide you with a guideline. For many years, some retirement planners have recommended that a retiree withdraw between 4-4.5% annually from savings. (This percentage is gradually adjusted north for inflation over the years.)2

The 4% rule is a worthwhile rule for many retirees, but it is hardly the only yardstick for retirement income withdrawals. At its Squared Away blog, the influential Center for Retirement Research at Boston College notes a study from one of its economists on this topic. It suggests an alternative – termed the RMD strategy – that mimics the Required Minimum Distributions the federal government requires from a traditional IRA after the original IRA owner enters his or her seventies. In this withdrawal strategy, you start withdrawing only 3.1% of your retirement assets at age 65, which climbs to 4.4% at 75 and then 6.8% by 85. (That is just withdrawal off of principal; interest and dividends can be added to that to give you more income.)2   

Are you wondering just how much money to live on in retirement? Are you also wondering how your retirement savings and income may grow? Talk with a financial professional about your options – you may have many more than you initially assume. A practical outlook on investing and decisions to work longer or claim Social Security later can also potentially help you amass or receive more money for the years ahead. 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. 

Citations.

1 – forbes.com/sites/nextavenue/2013/08/22/5-cures-for-womens-retirement-spending-paralysis/ [8/22/13]

2 – squaredawayblog.bc.edu/squared-away/retiree-paralysis-can-i-spend-my-money/ [7/11/13]

Albert Aizin is a Representative with FSC Securities and may be reached at http://www.theretirementgroup.com. 

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, Verizon, Merck, Glaxosmithkline, Bank of America, Chevron, Hughes, Qwest, ExxonMobil, AT&T, Raytheon, Pfizer, ING Retirement, Northrop Grumman, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process. 

 

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of Albert Aizin and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867. 

How Much Health Care Reform Will Be Seen By 2014?

How Much Health Care Reform Will We See By 2014?

Can the federal government follow through on its ambitions?

In 2014, we were supposed to see profound health care reform per the 2011 Affordable Care Act – but how much of that reform will roll out on time?

The federal government has already conceded that it can’t enforce the employer mandate portion of the Affordable Care Act by 2014. On July 2, the Obama administration gave businesses with 50 or more employees a 1-year reprieve from having to provide affordable health insurance to full-time employees (people working 30 or more hours weekly).1,2

So how about the state health insurance exchanges that are scheduled to be up and running by October 1? How about the planned expansion of Medicaid? Will these reforms also be delayed? The House of Representatives has scheduled a mid-July vote to attempt to do just that. Lastly, do small businesses have any enthusiasm about health care reform?3

What’s the progress on the state exchanges? The progress report isn’t good. As the Wall Street Journal noted last month, even the Government Accountability Office thinks that a “timely and smooth implementation of the exchanges by October 2013 cannot yet be determined.4

Small businesses and the self-employed are supposed to be able to find affordable coverage through these online marketplaces. The small business exchange rollout has already encountered glitches. In some states, only one insurance carrier has shown interest in them; the state of Washington is simply postponing its exchange because no carrier wanted to provide small business plans statewide. In 2014, businesses will be asked to select and offer one insurance plan from the exchanges to their workers. In the initial conception, they could elect to offer employees multiple insurance options. The federal Centers for Medicare & Medicaid Services are overseeing the implementation of the individual exchanges in 33 states; 17 other states and the District of Columbia are setting up their own exchanges.4

Individual exchanges in 34 states will be created via the federal government – but on July 5, it quietly granted another concession. The Department of Health and Human Services relaxed a requirement for the 16 other states and the District of Columbia to verify the income and health coverage status of applicants to those individual exchanges. These 17 exchanges will only check the income eligibility of applicants at random next year, and they will wait until 2015 to check if applicants are getting employer-sponsored health benefits.5

The WSJ learned that states running their own exchanges had missed, on average, 44% of the interim deadlines for these projects through the end of March. Still, DHHS chief technology officer Todd Park told CNBC that the state exchanges are “on track” and will allow open enrollment beginning October 1.4,6

Where do things stand state-by-state with the Medicaid expansion? Just 23 states and the District of Columbia have signed up for it. (You’ll recall that the Supreme Court allowed states to opt out of it when it ruled that the ACA was constitutional in 2012.) In these states and in Washington D.C., those with earnings of up to 138% of the federal poverty level may qualify for Medicaid (that works out to earnings of $15,856 for an individual and $32,499 for a family of four). The expansion of Medicaid in these states doesn’t require the federal government to recreate the wheel, but delays could happen in other ways. In Michigan, for example, state legislators have passed their own version of a Medicaid expansion requiring a 90-day federal review process, which will put Michigan weeks behind in enrolling participants in expanded Medicaid coverage.6,7

Do employers even care about the ACA’s incentives? The ACA opens the door for employers to markedly increase the percentage of employee benefits represented by wellness incentives. Yet in a survey of 1,000+ employers conducted by Virgin HealthMiles and Workforce Magazine, just 25.8% of companies surveyed said they intended to draw on wellness provisions of the ACA to enhance employee health benefit offerings. A lack of information about such incentives may be a factor here for both employers and employees. In fact, the survey also polled almost 10,000 workers at these companies and found that while 87.2% looked at health and wellness packages when considering a job, half of the respondents said they were “not aware of, or need to know more about, health and wellness programs offered by employers.”8

Frankly, what’s to get excited about? An analysis from insurance consulting firm Millman says that individual premiums could grow 25-40% costlier due to the ACA with small market group premiums rising 6-12%. On the other hand, Humana estimates that by renewing individual and group health plans before 2014, a workplace with predominantly younger and healthier employees could see rates rise by 15% or less. Unsurprisingly, a number of major carriers are expected to offer early renewals.9

President Obama noted the possibility of “glitches and bumps” along the way to the ACA’s full implementation. They are evident now.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – kansascity.com/2013/07/03/4328512/qa-on-impact-of-health-law-delay.html [7/3/13]

2 – money.cnn.com/2013/07/03/smallbusiness/obamacare-employer-mandate/index.html [7/3/13]

3 – abcnews.go.com/blogs/politics/2013/07/house-to-vote-next-week-to-delay-individual-mandate/ [7/11/13]

4 – online.wsj.com/article/SB10001424127887324520904578553871314315986.html [6/19/13]

5 – reuters.com/article/2013/07/08/us-usa-healthcare-obamacare-idUSBRE96700R20130708 [7/8/13]

6 – webmd.com/health-insurance/news/20130711/is-us-health-care-reform-on-track-for-2014 [7/11/13]

7 – lansingstatejournal.com/article/20130707/NEWS04/307070073/Clock-ticking-Michigan-Medicaid-expansion [7/7/13]

8 – benefitspro.com/2013/06/03/employers-ignoring-ppaca-wellness-incentives [6/3/13]

9 – benefitspro.com/2013/05/31/putting-off-ppaca-with-early-plan-renewals#.UdQRNFW13Vk.email [5/31/13]

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, Pfizer,  Northrop Grumman, Hughes, Glaxosmithkline, Qwest, Verizon, AT&T,  ExxonMobil, Bank of America,  Merck,  ING Retirement, Raytheon,  Chevron, Alcatel-Lucent, or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

Albert Aizin is a Representative with FSC Securities and maybe reached at http://www.theretirementgroup.com.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of Albert Aizin, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

 

Is Withdrawing From IRAs Last The Best Approach?

Conventional wisdom says yes, but there are exceptions.

   

Shouldn’t you delay IRA distributions for as long as you can? According to conventional retirement planning wisdom, you should structure your retirement withdrawals so that money comes out of your taxable accounts first, then your tax-deferred accounts, and then finally your tax-free accounts. Roughly speaking, that means withdrawing income from investment funds, CDs, money market accounts and bank accounts before taking a dime from your IRAs.

 

The wisdom behind this is easy to discern. By postponing withdrawals from a traditional IRA and/or Roth IRA for as long as possible, you give the assets in those tax-advantaged accounts even more time to grow. You have to take required minimum distributions from a traditional IRA after age 70½, of course; if you have a Roth IRA, RMD rules are inapplicable while you are alive.1

Or should you disregard that approach? Under certain circumstances, it may be a good idea to tap your IRA(s) in the early stages of retirement. While it may seem unconventional, making IRA withdrawals in your 60s might potentially help you enhance your wealth in the long term.

 

How, exactly? If you start drawing down the assets in your traditional IRA before age 70½, your RMDs could eventually be smaller than they would be otherwise. Smaller RMDs mean less taxable income. Not only that, a smaller RMD might keep you in a lower income tax bracket; welcome relief if you have a large traditional IRA.

Can exemptions & deductions shelter the income? A study from Rider University in New Jersey sees merit in this unconventional strategy. In the big picture, the researchers at Rider feel it may help seniors to level out annoying fluctuations in adjusted gross income and taxable income over the long run.2

 

The key: sheltering some or all of the early IRA withdrawals with IRS standard deductions and personal exemptions. As an example, take a married couple in which both spouses are at least age 65. The spouses have done their homework and determined that their IRS deductions and exemptions will add up to (at least) $21,800 for 2012. If their taxable income before any IRA withdrawal would fall below $21,800, they could use “withdrawals from tax-deferred IRAs to create tax-free income,” according to Alan Sumutka, one of the researchers behind the Rider study.2

 

The Rider study compared 15 model scenarios. Each one used a hypothetical married couple (both 65-year-olds) retiring in 2013 with $2 million in investable assets, $80,000 in current living expenses and $30,000 arriving from Social Security. Within the mock $2 million portfolio, 70% of the assets were held in traditional IRAs, 20% in taxable accounts and the rest in Roth IRAs. The portfolio returned a steady 6% annually (again, these were model scenarios).2

 

What was the most tax-efficient model scenario in the bunch? It played out as follows: from age 65 to age 70, the couple drew down their traditional IRAs right to the limit of their combined deductions and exemptions. Then, they reached into their taxable accounts for the balance of the money needed to meet that $80,000 in expenses, incurring taxes of up to 15% on long-term gains. They didn’t tap their Roth IRAs.2

 

After age 70½, they altered their approach: they took required distributions from their traditional IRAs, withdrew money from taxable accounts until those were exhausted, and then they turned to Roth accounts with the remaining balances on the traditional IRAs representing the last of their retirement savings.2

 

After all that, the hypothetical couple still had $1.61 million in their portfolio at age 95. The conventional withdrawal strategy (taxable accounts first, then tax-deferred accounts, then tax-free accounts) left them with just $1.17 million at that age, and it also led to them spending 23 years in the 25% tax bracket.2

 

The Rider study found that this approach was ill-suited to very large portfolios (ones with assets above $8 million) and portfolios with roughly 50% in taxable assets. It was also a bad fit for couples with sizable taxable pensions.2

 

It is worthwhile to review your retirement assumptions. As the American vision of retirement has changed in the last generation, so have retirement planning precepts. The recession and the financial pressures facing the baby boomers have upended some of the conventional thinking. A talk with a retirement planner may lead you toward some new financial options and some good ideas worth exploring.

 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

   

 

Citations.

1 – http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions#3 [8/2/12]

2 – money.msn.com/retirement-plan/when-should-you-tap-your-iras [11/16/12]

 

The Retirement Group is not affiliated with nor endorsed by fidelity.com, resources.hewitt.com, Hughes, Bank of America, Glaxosmithkline, Northrop Grumman, ING Retirement, Verizon, netbenefits.fidelity.com, hewitt.com, Pfizer, Raytheon, Merck, AT&T, ChevronQwestExxonMobil, access.att.com, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of Albert Aizin, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

Albert Aizin is a Representative with FSC Securities and may be reached athttp://www.theretirementgroup.com.

Weekly Economic Update 6/3

June 3, 2013

    

CONSUMERS UPBEAT IN MAY, SPEND LESS IN APRIL

Consumer spending slipped 0.2% in April, with a 4.4% drop in purchases of gas, electricity and other energy goods and services being a major influence. In better news, the Commerce Department noted a 3.4% rise in personal spending in Q1, and the two most-watched consumer confidence gauges beat consensus forecasts last week. The Conference Board’s May survey came in at 76.2, topping the 72.5 projected by analysts polled by Briefing.com. The final May consumer sentiment survey from the University of Michigan rose to 84.5; the same group of forecasters had projected it at 82.5.1,2

  

HOME PRICES GAIN NEARLY 11% IN A YEAR

To be precise, 10.9%: that was the 12-month improvement across 20 cities noted in the March edition of the S&P/Case-Shiller Home Price Index. In other housing news, the National Association of Realtors announced a 1.5% rise in pending home sales for April, bringing the annualized gain to 7.0%.3

    

AN UPDATE ON MEDICARE’S LONG-TERM HEALTH

Last week saw the release of the 2013 Medicare and Social Security trustee reports. While Social Security is still projected for a shortfall in 2033, Medicare’s board now forecasts that the program can run until 2026 without depleting its trust fund, citing projected savings from the Affordable Care Act. That is two years longer than previously projected. Friday, Health & Human Services secretary Kathleen Sebelius said she did not foresee an increase in Medicare Part B premiums in 2014.4

   

S&P 500 NOTCHES 7-MONTH WINNING STREAK

Even though it sank 1.14% for the week, the broad U.S. benchmark gained 2.08% for May, ending the month at 1,630.74. While the Dow (-1.23% to 15,115.57) and NASDAQ (-0.09% to 3,455.91) didn’t advance last week either, they respectively gained 1.86% and 3.82% last month.5

    

THIS WEEK: ISM’s May manufacturing PMI arrives Monday, plus Commerce Department figures on May auto sales. Tuesday, Dollar General announces Q1 earnings. Wednesday, ISM’s May service sector index comes out along with the May ADP employment report, a new Federal Reserve Beige Book and data on April factory orders; Q1 results arrive from Hovnanian and VeriFone. On Thursday, the Bank of England and European Central Bank wrap up policy meetings, and the May Challenger job cuts report comes out along with initial unemployment claims data and earnings from Ann and JM Smucker. Friday, the Labor Department releases the May employment report.

  

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+15.35

+21.96

+3.92

+7.08

NASDAQ

+14.45

+22.23

+7.40

+11.65

S&P 500

+14.34

+24.45

+3.29

+6.92

REAL YIELD

5/31 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

-0.05%

-0.50%

1.58%

1.77%

 

Sources: cnbc.com, bigcharts.com, treasury.gov – 5/31/135,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

«RepresentativeDisclosure»

 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 – latimes.com/business/money/la-fi-mo-personal-income-consumer-spending-economy-20130531,0,3433990.story [5/31/13]

2 – briefing.com/investor/calendars/economic/2013/05/27-31 [5/31/13]

3 – foxbusiness.com/news/2013/05/28/case-shiller-us-home-prices-rise-again-in-march/ [5/28/13]

4 – money.usnews.com/money/blogs/the-best-life/2013/05/31/social-security-deficit-outlook-remains-unchanged [5/31/13]

5 – cnbc.com/id/100779852 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F31%2F12&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F31%2F12&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F31%2F12&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F30%2F08&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F30%2F08&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F30%2F08&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F30%2F03&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F30%2F03&x=0&y=0 [5/31/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F30%2F03&x=0&y=0 [5/31/13]

7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [5/31/13]

8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [5/31/13]

The Retirement Group is not affiliated with nor endorsed by fidelity.com, resources.hewitt.com, Hughes, Bank of America, Glaxosmithkline, Northrop Grumman, ING Retirement, Verizon, netbenefits.fidelity.com, hewitt.com, Pfizer, Raytheon, Merck, AT&T, ChevronQwestExxonMobil, access.att.com, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of Timothy Lynott, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

Timothy Lynott is a Representative with FSC Securities and may be reached athttp://www.theretirementgroup.com.

Weekly Economic Update 5/20

May 20, 2013

    

SUBDUED INFLATION IN APRIL

Consumer and producer prices retreated last month. The federal government’s Consumer Price Index fell 0.4%, a monthly descent unseen since December 2008; the Producer Price Index declined 0.7%, its biggest monthly drop in three years. Consumer prices also fell for a second straight month; the last time that happened was in late 2008. The core CPI did rise 0.1% in April; the yearly gain in the overall CPI was just 1.1%.1

THREE MORE POSITIVE SIGNS FOR THE ECONOMY

The University of Michigan’s initial May consumer sentiment survey came in at 83.7 – its highest level since July 2007, 7.3 points above the final April mark. After falling 0.2% for March, the Conference Board’s index of U.S. leading indicators rose 0.6% for April. Census Bureau data showed retail sales ticking up 0.1% in April and 3.7% in the past year.2,3

HOUSING STARTS PLUNGE, BUILDING PERMITS SOAR

While the year-over-year increase was 13.1%, housing starts plummeted 16.5% in April, largely due to a 37.8% drop in apartment starts. On the other hand,  last month brought a 14.3% rise in building permits … marked by a 40.6% jump in permits for apartment construction.4

BULLS KEEP RUNNING

The S&P 500 is now on a 4-week winning streak. It rose another 1.98% last week to settle at 1,666.12 Friday. Complementing that 5-day gain, the NASDAQ went +1.82% last week while the DJIA went +1.56%; at Friday’s closing bell, the NASDAQ settled at 3,498.97 and the Dow at 15,354.40. A truly impressive factoid: the NASDAQ and S&P have gained 1% or more in each of the past four weeks.5

THIS WEEK: Monday brings earnings from Campbell Soup, TiVo and Urban Outfitters. On Tuesday, Best Buy, Home Depot, Medtronic, Vodafone, Saks, TJX and NetApp announce quarterly results. Wednesday, NAR releases its report on April existing home sales, the Federal Reserve releases the May 1 FOMC minutes, and Fed chairman Ben Bernanke testifies before Congress; Staples, L Brands, PetSmart, Toll Brothers, Target, Lowe’s and Hewlett-Packard post earnings. The Census Bureau report on April new home sales appears Thursday, along with the March FHFA housing price index and earnings from Dollar Tree, Gamestop, Ralph Lauren, Sears Holdings, Gap, Ross Stores, Aeropostale and Pandora. Friday offers the April durable goods orders report and Q1 results from Abercrombie & Fitch.

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

+17.17

+23.40

+3.65

+7.69

NASDAQ

+15.88

+24.36

+7.67

+12.74

S&P 500

+16.82

+27.69

+3.38

+7.64

REAL YIELD

5/17 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

-0.31%

-0.35%

1.41%

1.84%

Sources: cnbc.com, bigcharts.com, treasury.gov – 5/17/135,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

«RepresentativeDisclosure»

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

 

Citations.

1 – businessweek.com/news/2013-05-16/consumer-prices-in-u-dot-s-dot-dropped-more-than-forecast-in-april [5/16/13]

2 – bloomberg.com/news/2013-05-17/u-s-stock-futures-rise-before-leading-indicators-data.html [5/17/13]

3 – census.gov/retail/marts/www/marts_current.pdf [5/13/13]

4 – latimes.com/business/money/la-fi-mo-housing-starts-construction-building-permits-economy-20130516,0,7678305.story [5/16/13]

5 – cnbc.com/id/100746158 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F17%2F12&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F17%2F12&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F17%2F12&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F16%2F08&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F16%2F08&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F16%2F08&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F16%2F03&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F16%2F03&x=0&y=0 [5/17/13]

6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F16%2F03&x=0&y=0 [5/17/13]

7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [5/17/13]

8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [5/17/13]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of Albert Aizin, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

Albert Aizin is a Representative with FSC Securities and may be reached at http://www.theretirementgroup.com.