Monthly Archives: October 2014

Fall Financial Reminders. The year is coming to a close. Have you thought about these financial ideas yet?

Fall Financial Reminders
The year is coming to a close. Have you thought about these financial ideas yet?

Design 23

By Greg Oliver

As every calendar year ends, the window slowly closes on a set of financial opportunities. Here are several you might want to explore before 2015 arrives.

Don’t forget that IRA RMD. If you own one or more traditional IRAs, you have to take your annual required minimum distribution (RMD) from one or more of those IRAs by December 31. If you are being asked to take your very first RMD, you actually have until April 15, 2015 to take it – but your 2015 income taxes may be substantially greater as a result. (Note: original owners of Roth IRAs never have to take RMDs from those accounts.)1

Did you recently inherit an IRA? If you have and you weren’t married to the person who started that IRA, you must take the first RMD from that IRA by December 31 of the year after the death of that original IRA owner. You have to do it whether the account is a traditional IRA or a Roth IRA.1

Here’s another thing you might want to do with that newly inherited IRA before New Year’s Eve, though: you might want to divide it into multiple inherited IRAs, thereby promoting a lengthier payout schedule for younger inheritors of those assets. Otherwise, any co-beneficiaries receive distributions per the life expectancy of the oldest beneficiary. If you want to make this move, it must be done by the end of the year that follows the year in which the original IRA owner died.1

Can you max out your contribution to your workplace retirement plan? Your employer likely sponsors a 401(k) or 403(b) plan, and you have until December 31 to boost your 2014 contribution. This year, the contribution limit on both plans is $17,500 for those under 50, $23,000 for those 50 and older.2,3

Can you do the same with your IRA? This year, the traditional and Roth IRA contribution limit is $5,500 for those under 50, $6,500 for those 50 and older. High earners may face a lower Roth IRA contribution ceiling per their adjusted gross income level – above $129,000 AGI, an individual filing as single or head of household can’t make a Roth contribution for 2014, and neither can joint filers with AGI exceeding $191,000.3

Ever looked into a Solo(k) or a SEP plan? If you have income from self-employment, you can save for the future using a self-directed retirement plan, such as a Simplified Employee Pension (SEP) plan or a one-person 401(k), the so-called Solo(k). You don’t have to be exclusively self-employed to set one of these up – you can work full-time for someone else and contribute to one of these while also deferring some of your salary into the retirement plan sponsored by your employer.2

Contributions to SEPs and Solo(k)s are tax-deductible. December 31 is the deadline to set one up for 2014, and if you meet that deadline, you can make your contributions for 2014 as late as April 15, 2015 (or October 15, 2015 with a federal extension). You can contribute up to $52,000 to SEP for 2014, $57,500 if you are 50 or older. For a Solo(k), the same limits apply but they break down to $17,500 + up to 20% of your net self-employment income and $23,000 + 20% net self-employment income if you are 50 or older. If you contribute to a 401(k) at work, the sum of your employee salary deferrals plus your Solo(k) contributions can’t be greater than the aforementioned $17,500/$23,000 limits – but even so, you can still pour up to 20% of your net self-employment income into a Solo(k).1,2

Do you need to file IRS Form 706? A sad occasion leads to this – the death of a spouse. Form 706, which should be filed no later than nine months after his or her passing, notifies the IRS that some or all of a decedent’s estate tax exemption is being carried over to the surviving spouse per the portability allowance. If your spouse passed in 2011, 2012, or 2013, the IRS is allowing you until December 31, 2014 to file the pertinent Form 706, which will transfer that estate planning portability to your estate if your spouse was a U.S. citizen or resident.1

Are you feeling generous? You may want to donate appreciated securities to charity before the year ends (you may take a deduction amounting to their current market value at the time of the donation, and you can use it to counterbalance up to 30% of your AGI). Or, you may want to gift a child, relative or friend and take advantage of the annual gift tax exclusion. An individual can gift up to $14,000 this year to as many other individuals as he or she desires; a couple may jointly gift up to $28,000 to as many individuals as you wish. Whether you choose to gift singly or jointly, you’ve probably got a long way to go before using up the current $5.34 million/$10.68 million lifetime exemption. Wealthy grandparents often fund 529 plans this way, so it is worth noting that December 31 is the 529 funding deadline for the 2014 tax year.1


1 – [10/8/14]
2 – [10/9/14]
3 –;-Taxpayers-May-Contribute-up-to-$17,500-to-their-401%28k%29-plans-in-2014

Ebola Fears Weigh on Wall Street. How will the market contend with a major unknown?

How will the market contend with a major unknown?

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What is the Ebola virus doing to stocks? That depends on who you ask. While the threat of another European recession, rapidly falling oil prices and the oncoming end of QE3 all had a hand in the selloff that intensified this week, the Ebola virus – a great unknown – sent a definite shudder through Wall Street.

As respected economist and market analyst Ed Yardeni commented last week in a note, “The stock market is now driven by emotion rather than fundamentals. The former rapidly switches from greed to fear on Ebola news.” According to CNBC’s Jim Cramer, stopping Ebola is top-of-mind on Wall Street, with recent headlines suggesting that “we do not know what we are doing as a nation. The fear is so palpable that we have to expect a SARS-like cutback in travel.”1,2

There is no precise way to measure the impact of Ebola fears on the S&P 500, but industry groups have certainly felt it. Shares of some of the major airlines and cruise lines have fallen as much as 20% within the past month. Major hotel stocks have taken a pronounced turn south as well. Shares of biotech companies linked to potential Ebola cures and firms that make Hazmat suits have recently doubled and tripled in value. The CBOE VIX, the so-called “fear index”, is up about 90% in the past month.1

A global health problem implies a global economic problem. The S&P is down about 8% at this writing from its last record close, and the market’s potential to rally suffers when you have an X factor that seems unquantifiable breeding bearish sentiment.1

Last month, global investors largely perceived Ebola as a West African health crisis, but that perception has changed. Stopping the pandemic before it gains ground in America is vital not only to our health, but also to our economy. If dozens or hundreds of Ebola cases were suddenly diagnosed in the U.S., you would see significant changes in consumer behaviors – and that could really dent corporate earnings.

As Cumberland Advisors CIO David Kotok put it in an October 10 note to investors: “Economic consequences [result] when fear and concern change behavior. If consumers and businesses retrench by reducing flights on airplanes, changing vacation plans, or altering business connections in a globally interdependent world, GDP growth rates will fall farther. We do not know how much, at what speed, or for how long.”3

The World Bank recently ventured a couple of guesses. In its worst-case scenario, the world sees 200,000 cases of Ebola by the end of 2015 and $32.6 billion drains out of the global economy. In the best-case scenario, the pandemic is almost wholly contained within Guinea, Liberia, and Sierra Leone with a short-term cost of $359 million to the global economy.4

Can stocks bounce back soon? Pessimists see a correction in progress, caused by Ebola fears, worries about Europe and the Middle East and a collective admission that the market is way ahead of the economy. Optimists see a buying opportunity – a turbulent moment that will pass with the federal government ultimately containing the virus, the eurozone and Japanese economies buoyed by stimulus efforts and earnings surprising to the upside.5

The health of the bull market may not depend entirely on keeping the Ebola pandemic in check, but it is undeniably important to its sustenance.