The stroke of midnight on New Year’s Eve is nearly here, ending this tax year and blasting us right into the next. So sip your Champagne, then make good on your New Year’s resolution to get your finances—from taxes to retirement—in order. Here are some questions to consider as you get started.
Theodore R Massaro, CLU®, AEP, ChFC®
M Financial Planning Services, Inc.
How can a financial planner help families to save for their retirement with the economy the way it is right now?
A planner can help a family identify areas where cash flows and existing investments can be more efficiently applied to improve long term savings and/or improve long term investment returns.
What can be given to a charity?
While most anything can be given to charity, these are the more common forms of donated property: cash, which is the easiest to give; real estate that is owned outright; or securities that have increased substantially in value. You can also name a charity as a beneficiary of a life insurance policy or charitable trust. There are many charitable planning options that can fit into your financial plan– be sure to discuss them with your advisor.
Should I be considering a Roth IRA?
A Roth IRA is potentially a valuable retirement resource, especially for conversions before year-end. Not only are qualified withdrawals tax free, Roth IRA distributions also do not impact the taxability of Social Security. In addition, Roth accounts pass to beneficiaries tax-free and are not subject to RMD withdrawals. There is a special deferral rule for 2010 conversions only. There are income limits that affect eligibility for a Roth IRA, so be sure to talk this option over with your advisor.
Why is the year-end investment review important?
If you don't normally review your investments at the end of each year, 2010 might be a good time to start. Why? Because significant changes in the tax code that are scheduled to go into effect in 2011 could substantially alter the taxation of your portfolio next year. That could in turn affect your investment strategy. And since many expect additional changes that will affect next year’s tax landscape, it’s even more important than usual to think about whether your portfolio needs fine-tuning.
The Registered Representatives of M Financial Planning are affiliated and securities are offered through LPL Financial, Member FINRA/SIPC.
Rick Clifford, CLU®, ChFC®
DVFG Advisors, LLC
Does any of the current financial news affect me?
Despite the signs that the economy is making a comeback, it isn’t easy to find Main Street financial news that’s worth much of a smile. But changes to the rules surrounding the popular Roth Individual Retirement Account (IRA), signed into legislation in 2006 and put into effect in 2010, are a good reason for some investors to take a break from licking their retirement portfolio wounds. They might even turn some of those lemons of portfolio-value loss into a bit of retirement lemonade.
What are the new rule changes?
The significant opportunity is the removal of income limits on conversions to a Roth IRA from a traditional IRA or qualified plan, such as a 401(k) or 403(b), plus the ability, in 2010 only, to spread the tax bill on the conversion over 2011 and 2012 filings. It’s not as straight forward as we’d like it to be when explaining it, and yes, there are taxes to be paid up front, but it is satisfying to see the how it can help some people in the long run.
Stanley H. Molotsky
The SHM Financial Group
Voorhees, Collingswood, Lakehurst
Are you concerned about the coming wave of inflation?
Yes, very definitely. Imagine a world where a cup of coffee cost $10… and the following year, it costs $12. Imagine nearly everything starts going up in price, year after year. Where I live, folks call that inflation. Sound far-fetched? Actually, it’s already started.
Let’s start by looking at what’s happening to food prices. Corn prices are up 44 percent in the past year. Soybeans are up 22 percent. Even sugar is up 24 percent. It’s pretty clear something is going on here. Because of those rising commodity costs, food companies are jacking up their prices to cope. As a result, expect to pay more for Big Macs, boxes of cereal and baking mixes, to name just a few things.
Keep in mind that investment trends often unfold slowly. And often, things happen exactly the way people least expect them to. Think about it: On the eve of 1970’s—the greatest inflation wave of the 20th century in America—investors were accepting Treasury yields of 4 percent. The bond market didn’t anticipate the great inflation, and it doesn’t today with the 10-year rate even lower, at 2.38 percent.
Since high inflation is not widely discounted in the market, the effect it will have on certain investments could be big. I believe being on the right side of the inflation question could be the single most important investment decision of the coming decade.
Published (and copyrighted) in South Jersey Magazine, Volume 7, Issue 9 (December, 2010).
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