Monthly Archives: March 2013

Protect Your Retirement Today with IRA effective Planning

Protect Your Retirement Today with IRA effective Planning

Have you been let go at work? What happens to the money you have saved in your employee retirement plan?

If you have been terminated by your employer, you have
4 choices when it comes to your retirement plan money:

* Cash it out (and lose part of it to taxes and possible tax penalties)
* Leave the money in the plan (with only a handful of investment options)
* Roll it into a new workplace retirement plan (with limited investment choices)
* Roll it over into an IRA (with no taxable event occurring, and with the ability to direct the money into many different types of investments)

Consider an IRA rollover. This is a smart move, and I can help you accomplish it. Through a trustee-to-trustee transfer, you avoid the 20% withholding tax that would otherwise be incurred by simply taking a distribution from the old plan and depositing that money in an IRA.

Want more tax-deferred growth for your retirement savings? An IRA rollover allows that to happen. You get continued tax deferral, you retain personal control over the money, and you can revise or change your investment mix as you wish.

Sound good? Call me at 513.860.7934 or e-mail The more you study the options, the more you realize that the IRA rollover stands out as the smart choice.

Dow started as a whisper will turn into a roar – and soon… ?

What Does the Dow’s Record High Really Mean?
Does it signal anything more than bullish sentiment?


Next stop, 15,000? As the Dow Jones Industrial Average settled at a new all-time high of 14,253.77 on March 5, the psychological lift on Wall Street was undeniable – the market was finally back to where it was in 2007. Or was it?1

For many Americans, the Dow equals the stock market, and the stock market is a direct product of the economy. It doesn’t quite work that way, of course. Right now, it is worth examining some of the factors that have driven the Dow to its series of record closes. Does the Dow’s impressive winter rally signal anything more than unbridled bullish enthusiasm?

The small picture. Investors should remember that the Dow Jones Industrial Average includes just 30 stocks – 30 closely watched stocks, to be sure, but still just 30 of roughly 2,800 companies listed on the New York Stock Exchange. The S&P 500, with its 500 components, is considered a better measure of the market. When you hear or read that “stocks advanced today” or “stocks retreated this afternoon”, the reference is to the S&P. As the Dow kept settling at all-time peaks in early March, the S&P was consistently wrapping up trading days at 5-year highs but still remained about 2% off its 2007 record close.2,3

You could argue that the Dow is even less representative of the broad stock market than it once was. In 2007, Kraft, Citigroup and General Motors were among the blue chips; since then, they’ve been tossed out and the index has gotten a little more tech-heavy.1

If you add up all the share prices of the 30 stocks in the Dow, you will not get a number over $14,000. The value of the Dow = 7.68 x the total share prices of all 30 Dow components. How did Dow Jones arrive at the magic multiplier of 7.68? It is a direct reflection of the Dow Divisor, which is a numerical value computed and periodically adjusted by Dow Jones Indexes. For every $1 that shares of a DJIA component rise in price, the value of the Dow rises 7.68 (the Dow Divisor, you see, is well beneath 1 – on March 7 it was 0.130216081).4,5,6

The DJIA isn’t indexed to inflation, so hitting 14,167 in 2013 isn’t quite like hitting 14,167 in 2007. It is a price-weighted index as well (i.e., each Dow component represents a fraction of the index proportional to its price), which also makes a comparison between 2007 and 2013 a bit hazy.1

The big picture. The Dow surpassed its old record thanks to many factors – the resurgent housing market, the Institute for Supply Management’s February purchasing managers indices showing stronger expansion in the manufacturing and service sectors, an encouraging ADP employment report, and of course earnings. Perhaps the most influential factor, however, is central bank policy. The Federal Reserve’s ongoing bond-buying has stimulated the real estate industry, the market and the overall economy, and fueled the DJIA’s ascent. The parallel, open-ended effort of the European Central Bank has diminished some of the anxiety over the future of the euro. In early March, the ECB and the Bank of England again refrained from adjusting interest rates and ECB president Mario Draghi mentioned the need for the bank to retain an “accommodative” policy mode until the eurozone economy sufficiently improves.3

In the big picture, two perceptions are moving the market higher. One is the conclusive belief that the recession is over. The other is the assumption that the Fed will keep easing for a year or more. Pair those thoughts together, and you have grounds for sustained bullish sentiment.

How high could the Dow go? Any time the Dow flirts with or reaches a new record high, bears caution that a pullback is next. Though many analysts feel stocks are fairly valued at the moment, a combination of headlines could inspire a retreat – but not necessarily a correction, or a replay of the last bear market.

While the market has soared in the first quarter, the economy grew just 0.1% in the fourth quarter by the federal government’s most recent estimate. That may have given some investors pause: the Investment Company Institute said that $1.13 billion left U.S. stock funds in the week of February 25-March 1, which either amounts to bad timing, an aberration (as it was the first outflow ICI recorded this year), profit-taking or skittishness.7

If the Dow hits 14,500 or 15,000, that won’t confirm that the economy has fully healed or that the current bull market will last X number of years longer. It will be good for Wall Street’s morale, however, and Main Street certainly takes note of that. Lazard Capital Markets managing director Art Hogan seemed to speak for the status quo in a recent article: “We’re certainly in an environment where good news is great and bad news is just okay. The market has just found the path of least resistance to the upside in the near term and it’s hard to find something to knock it off there.”7

1 – [3/6/13]
2 – [3/7/13]
3 – [3/7/13]
4 – [2/28/13]
5 – [3/7/13]
6 – [3/7/13]
7 – [3/7/13]

The End of Charity …

Ways the Middle Class Can Make a Difference for Charity
You don’t need to be wealthy to make an impact and get a win-win.


Do you have to make a multimillion-dollar gift to a charity to receive immediate or future financial benefits? No. If you’re not yet a millionaire or simply a “millionaire next door,” yet want to give, consider the following options which may bring you immediate or future tax deductions.
Partnership gifts. These gifts are made via long-term arrangements between donors and recipient charities or non-profits, usually with income resulting for the donor and an eventual transfer of the principal to the charity at the donor’s death.

For example, a charitable remainder trust also allows you to pay yourself a dependable income (typically for life) and then distribute the remaining trust principal to charity. A charitable lead trust offers you the potential to reduce gift and estate taxes on assets passing to your heirs by making annual charitable gifts; your beneficiaries get the leftover trust assets at the end of your life or the specified trust term. You could even name a charitable life income arrangement as the beneficiary of your IRA.1,2

If you don’t have enough funds to start one of these, you might opt to invest some of your assets in a pooled income fund offered by a university or charity. Your gifted assets go into a “pool” of assets invested by a fund manager; you get a pro rata share of the income of the fund for life, and when your last income beneficiary passes away, the principal of your gift goes to the school or charity.
If you like the idea of a family foundation but don’t quite have the money and don’t want the bureaucracy, you could consider setting up a donor-advised fund. You make an irrevocable contribution to a third-party fund, realizing an immediate tax deduction; the fund invests the money in an account you create. You advise the fund where the money goes and how it grows, but the fund makes the actual grants to nonprofits.

Lifetime gifts. These are charitable gifts in which the donor retains no powers or other controls over the gift once it is made. A lifetime gift of this sort is not included in what the IRS calls your Gross Estate (but taxable gifts are used in calculation of estate tax).3
Lifetime gifts also include outright gifts of cash or appreciated assets such as stocks or real estate. A gift of appreciated stock could bring you a charitable deduction to lower your income tax, and help you avoid capital gains tax linked to the sale of the appreciated shares.

Through a gift of appreciated property, you can transfer a real estate deed to a school or charity and get around capital gains taxes that may result from a property’s sale. If you have held the appreciated property for at least a year, the gift is deductible up to 30% of adjusted gross income with no capital gains tax on the appreciation. You could even arrange a retained life estate, in which you deed your home to a charity or non-profit while retaining the right to live in it as your primary residence for the rest of your life.4

Estate gifts. These are deferred gifts you make after your lifetime, without impact on your current lifestyle. You can make a bequest to a charity through your will or a living trust without generally incurring estate taxes on the gift amount. A gift of life insurance to a university or charity can give you an immediate income tax deduction for the cash surrender value of a paid-up policy, and possible future deductions. You can also make an IRA gift or retirement plan gift effective upon your death, with the non-profit organization receiving some or all of the assets as you wish.5,6

The caveats. As your income increases, you may face limits on the amount of charitable gifts you can deduct. If you are retired, an increase in income can also cause more of your Social Security benefits to be taxed. The IRS says that your charitable deductions for any tax year cannot be more than more than 50% or your adjusted gross income (possibly 30% or 20% depending on the specifics of your gifts). But if you exceed such limits, the IRS lets you carry forward excess contributions for up to five years.4
Would you like to learn more? Okay, so they may not name a hospital wing or a library after you. But your charitable gifting can have real effect even if you don’t have a fortune. Keep in mind that your unique circumstances need to be weighed before making any decision.

As with all tax and estate planning, please consult your financial advisor, attorney or tax advisor to affirm that you are in a position to fully benefit from charitable deductions.

1 [3/6/13]
2 [3/6/13]
3 [3/4/13]
4 [3/6/13]
5 [3/6/13]
6 [4/23/12]

All retirement plans are not the same.

All retirement plans are not the same.

In fact, there is such a wide variety of retirement plans available that it is worth it to read up on your choices. Here’s a brief look at the different plans and what they have to offer.

The traditional 401(k). Most people have such a retirement savings plan, and it works like this. The plan is funded with pre-tax dollars taken out of your paycheck (through payroll deductions). If you’re lucky, your company will match your level of contribution or even make contributions on your behalf – after all, the employer contributions are tax-deductible.

The I.R.S. will currently let you put up to $17,500 a year in a traditional 401(k); COLA adjustments may drive that limit higher in the future. The I.R.S. also allows catch-up contributions (additional contributions from those aged 50+), with a current annual limit of $5,500. In 2013, the total amount put into a 401(k) by you and your employer can’t exceed the lesser of 100% of your compensation or $51,000 ($56,500 if you are 50 or older).1,2

There are several variations on the traditional 401(k) theme …

The Safe Harbor 401(k). A byproduct of the Small Business Job Protection Act of 1996, the Safe Harbor plan combines the best features of the traditional 401(k) and a SIMPLE IRA, making it very attractive to a business owner. With a Safe Harbor plan, an owner-operator can avoid the big administrative expenses of a traditional 401(k) and enjoy higher contribution limits. The Safe Harbor plan allows for employers to make matching or non-elective contributions. Employers typically match contributions dollar-for-dollar until the employee’s contribution equals 3% of an employee’s compensation. Past that, an employer may optionally match employee contributions at 50 cents on the dollar until the employee’s contribution equals 5% of employee compensation.3

The SIMPLE 401(k). Designed for small business owners who don’t want to deal with retirement plan administration or non-discrimination tests, the SIMPLE 401(k) is available for businesses with less than 100 employees. Like a Safe Harbor plan, the business owner must make fully vested contributions (a dollar-for-dollar match of up to 3% of an employee’s income, or a nonelective contribution of 2% of pay for each eligible employee.). For 2013, the maximum pretax employee contribution to a SIMPLE 401(k) is $12,000. Catch-up contributions for those 50 and older are limited to $2,500. Employees with a SIMPLE 401(k) can’t have another retirement plan with that company.1,3

The Solo 401(k). Combine a profit-sharing plan with a regular 401(k), and you have the Solo 401(k) plan, a retirement savings vehicle designed for sole proprietors with no employees other than their spouses. These plans permit a 2013 employee contribution of up to $17,500, $23,000 if you’re 50 or older. They also permit a profit sharing contribution of up to $51,000 in 2013 ($56,500 for those 50 or older).4

The Roth 401(k). Imagine a traditional 401(k) fused with a Roth IRA. Here’s the big difference: you contribute after-tax income to a Roth 401(k), and when you reach age 59½, your withdrawals will be tax-free (provided you’ve had your plan for more than five years). The annual employee contribution limits are the same as those for a traditional 401(k) plan: $16,500 for 2013, $22,000 for those 50 or older.1,5

You can roll Roth 401(k) assets into a Roth IRA when you retire – and you don’t have to make mandatory withdrawals from a Roth IRA when you turn 70½. With a standard 401(k), you have to roll over the assets to a traditional IRA and make the required withdrawals.5

The DB(k). The DB(k) is a defined benefit retirement plan with some of the features of a 401(k), designed for companies with fewer than 500 employees. A DB(k) offers participants a retirement savings plan with the potential for a small income stream in the future, mimicking the pensions of years past. The pension-like income equals either a) 1% of final average pay times the number of years of service, or b) 20% of that worker’s average salary during his or her five consecutive highest-earning years.6

And then there are SEP-IRA, SIMPLE IRA and Keogh plans …

The SEP-IRA. This employer-funded plan gives businesses a simplified vehicle to make contributions toward workers’ retirements (and optionally, their own). The employer contributions are 100% vested from the start, and the employer can supplement the SEP-IRA with another retirement plan. In 2013, an employer’s annual contribution limit to a SEP-IRA can’t exceed the lower of $51,000 or 25% of an employee’s salary. The same annual contribution limits apply for the self-employed.7

The SIMPLE IRA. This is like a SIMPLE 401(k) – a small business retirement plan with mandatory employer and optional employee contributions and a $12,000 maximum contribution limit in 2013 ($14,500 for employees 50 and older). Employers can choose to make a 2% non-elective contribution (that is, plan participants get an employer contribution equal to 2% of their compensation), or a dollar-for-dollar match up to 3% percent of their compensation.1,8

The Keogh plan. Keoghs are popular with self-employed business owners, and they are available to sole proprietorships, LLCs, and partnerships. There are defined benefit, money purchase and profit-sharing variations; the defined benefit variation is a qualified pension plan offering a fixed benefit amount. In 2013, the contribution limit for a Keogh defined contribution plan is $51,000 (subject to self-employment income limits), while the contribution limit for a Keogh defined benefit plan is the lesser of $205,000 or 100% of your average compensation for your three highest-earning years.9

Did you know you had so many choices? If you are an employer, you may not have realized you have such an array of choices in retirement plans. But you do, and asking the right questions may represent the first step toward implementing the right plan for your future or your company. If you have any questions about these plans, please call me at «representativephone», or simply send an e-mail to «representativeemail». I would be happy to speak with you.

1 [10/19/12]
2,-Employee/Retirement-Topics—401%28k%29-and-Profit-Sharing-Plan-Contribution-Limits [10/25/12]
3 [10/22/10]
4 [2/13/13]
5 [2/5/13]
6 [10/11/12]
7 [2/13/13]
8 [2/15/13]
9 [1/31/13]

Will You Get the Jackpot?

Retirement Seen Through Your Eyes
After you leave work, what will your life look like?

Provided by GREG OLIVER

How do you picture your future? If you are like many baby boomers, your view of retirement is likely pragmatic compared to that of your parents. That doesn’t mean you have to have a “plain vanilla” tomorrow. Even if your retirement savings are not as great as you would prefer, you still have great potential to design the life you want.

With that in mind, here are some things to think about.

What do you absolutely need to accomplish? If you could only get four or five things done in retirement, what would they be? Answering this question might lead you to compile a “short list” of life goals, and while they may have nothing to do with money, the financial decisions you make may be integral to achieving them. (This may be the most exciting aspect of retirement planning.)

What would revitalize you? Some people retire with no particular goals at all, and others retire burnt out. After weeks or months of respite, ambition inevitably returns. They start to think about what pursuits or adventures they could embark on to make these years special. Others have known for decades what dreams they will follow … and yet, when the time to follow them arrives, those dreams may unfold differently than anticipated and may even be supplanted by new ones.

In retirement, time is really your most valuable asset. With more free time and opportunity for reflection, you might find your old dreams giving way to new ones. You may find yourself called to volunteer as never before, or motivated to work again but in a new context.

Who should you share your time with? Here is another profound choice you get to make in retirement. The quick answer to this question for many retirees would be “family”. Today, we have nuclear families, blended families, extended families; some people think of their friends or their employees as family. You may define it as you wish and allocate more or less of your time to your family as you wish (some people do want less family time when they retire).

Regardless of how you define “family” or whether or not you want more “family time” in retirement, you probably don’t want to spend your time around “dream stealers”. They do exist. If you have a grand dream in mind for retirement, you may meet people who try to thwart it and urge you not to pursue it. (Hopefully, they are not in close proximity to you.) Reducing their psychological impact on your retirement may increase your happiness.

How much will you spend? We can’t control all retirement expenses, but we can control some of them. The thought of downsizing may have crossed your mind. While only about 10% of people older than 60 sell homes and move following retirement, it can potentially bring you a substantial lump sum or lead to smaller mortgage payments. You could also lose one or more cars (and the insurance that goes with them) and live in a neighborhood with extensive, efficient public transit. Ditching land lines and premium cable TV (or maybe all cable TV) can bring more savings. Garage sales and donations can have financial benefits as well as helping you get rid of clutter, with either cash or a federal tax deduction that may be as great as 30-50% of your adjusted gross income provided you carefully itemize and donate the goods to a 501(c)(3) non-profit.1

Could you leave a legacy? Many of us would like to give our kids or grandkids a good start in life, or help charities or schools – but given the economic realities of retiring today, there is no shame in putting your priorities first.

Consider a baby boomer couple with, for example, $285,000 in retirement savings. If that couple follows the 4% rule, the old maxim that you should withdraw about 4% of your retirement savings per year, subsequently adjusted for inflation – then you are talking about $11,400 withdrawn to start. When you combine that $11,400 with Social Security and assorted investment income, that couple isn’t exactly rich. Sustaining and enhancing income becomes the priority, and legacy planning may have to take a backseat. In Merrill Lynch’s 2012 Affluent Insights Survey, just 26% of households polled (all with investable assets of $250,000 or more) felt assured that they could leave their children an inheritance; not too surprising given what the economy and the stock market have been through these past several years.2

How are you planning for retirement? This is the most important question of all. If you feel you need to prepare more for the future or reexamine your existing plan in light of changes in your life, then confer with a financial professional experienced in retirement planning.

1 – [2/28/13]
2 – [9/12]