Category Archives: Money Talks

Money Talks is a regular department in Agency Sales magazine. This column features articles from a variety of financial professionals and is intended to showcase their individual opinions only. The contents of this column should not be construed as investment advice; the opinions expressed herein are not the opinions of MANA, its management, or its directors.

Tax Strategies, Year-End 2007

By and

“The avoidance of taxes is the only intellectual pursuit that carries any reward.” — John Maynard Keynes

Overview
Tax planning primarily concerns the timing and the method by which income is reported and deductions and credits are claimed. The basic strategy for all year-end tax plans is to time your income so that it will be taxed at a lower rate — and to time your deductible expenses (and any tax credits) so that they can be claimed in a year in which you are in a higher tax bracket. The tax planning rules are simple (while their execution may … Read the rest

Is Health Care Part of Your Retirement Plan?

By

Ask a group of investors aged 50 and older to identify their top financial concern relating to retirement, and chances are they’ll answer “health care.”

With medical costs skyrocketing and limited coverage by programs such as Medicare, many retirees face expensive monthly insurance premiums and significant out-of-pocket costs. That’s why it’s important for pre-retirees to consider health care costs when planning for their later years and for current retirees to carefully manage their sources of income.

A Sizable Cost

A look at the cost of health care can help put the issue in perspective. The Employee Benefit Research Institute has … Read the rest

Buy-Sell Agreements

By and

“You can marry more money in five minutes than you can earn in a lifetime.”

A buy-sell agreement is frequently the key document in a company’s business continuation plan and the owners’ estate plans. These agreements establish a fair price for an ownership interest in a closely-held business and ensure an orderly business transition. They usually provide that the business (or a portion thereof in the case of multiple owners) will be sold (or offered for sale) at a specified price and under certain circumstances, which are detailed in the agreement. The primary circumstances (“triggering events”) are: death, disability or … Read the rest

Do REITs Make Sense for Your Portfolio?

By

By now you should have heard the word “REIT” in the investment world, but you may be wondering what one is and how it works.

First, realize that REITs (Real Estate Investment Trusts) are not new. They’ve been around for more than 45 years. However, it has only been since the 1990s that REITs have gained popularity. From the end of 1992 to the middle of 2001, the size of the REIT industry has increased almost tenfold. But, according to the Institute of Business and Finance*, the REIT industry has only captured 10% of the $3.5 trillion commercial real estate … Read the rest

Selling or Buying a Business

By

“The scientific theory I like best is that the rings of Saturn are composed entirely of lost airline luggage.” — Mark Russell

Overview

Not only may this be one of the most significant actions of your business life, but one that is also riddled with various complex tax ramifications. Since the vast majority of you do not often engage in such transactions, even the most sophisticated and successful businesspersons are frequently caught off-guard by all these brand new (to them) rules, angles, restrictions, implications, outcomes — and, above all, the tax costs.

C Corporation

You can either sell the stock … Read the rest

Healthcare and Retirement

By

The rising cost of health care in America has become one of the primary risks to a financially secure retirement.

Health insurance premiums and medical expenses now consume a hefty portion of retiree savings. And the future looks more troubling. Healthcare costs are expected to continue to increase faster than inflation, and many employers are re-evaluating their ability to offer retiree health insurance coverage.

Strategies for Managing Healthcare Expenses in Retirement

So how can you make sure rising healthcare costs don’t wreck your carefully laid retirement income plans?

  • Leverage COBRA coverage.

COBRA, the Consolidated Omnibus Reconciliation Act, is a federal … Read the rest

Assorted Info — Some Good, Some Bad

By and

“E-file will cut many months off the audit process and will allow us to develop sophisticated analytical tools to better select areas of audit inquiry.” — IRS Commissioner Mark W. Everson

Would You Like to Pay Your Payroll Tax Deposits — Twice?

Both the IRS and the courts have taken the position (and won) that if you give money to an independent agent to pay an obligation of your business, and they do not do so — you still owe the money! This recent case is not the first one involving payroll tax deposits and outside agents. Outsourcing payroll functions … Read the rest

Are You Open to Greater Potential Investment Return?

By

Consider a closed-end mutual fund.

If you’re actively saving for your retirement, chances are you may have a few mutual funds working for you. And most likely, they’re the typical open-end mutual funds, as these are the ones which are advertised and marketed the most. But did you know there’s another type of mutual fund available that can also produce competitive returns? It’s called a closed-end mutual fund, and it can offer great opportunities for investors.

Unlike the traditional open-end mutual fund, which issues an unlimited number of shares, a closed-end mutual fund issues only a limited number of shares. … Read the rest

401(k): You Can Take It With You

By

If you contribute to your employer’s 401(k) plan and  leave your job, one of the biggest decisions you will make is what to do with the money in your plan.

Since the federal tax code was changed in 1978 to create 401(k) plans, many individuals have used this type of employer-sponsored defined-contribution plan to save money for retirement in a tax-deferred account. At the end of 2003, these plans had an estimated $1.9 trillion in assets, according to the Employee Benefit Research Institute.

But in our increasingly mobile society, changing jobs is a real possibility. What should you do with … Read the rest

Don’t Overlook Asset Allocation

By

During periods of strong stock performance, many investors over‑weight stocks to take advantage of outstanding returns. Risk often seems minimal during these times as people watch their accounts grow. Bonds — with their limited returns — are largely forgotten. Invariably, though, the party ends and, all of a sudden, economic turmoil and a stock-market downturn create the opposite effect as investors abandon equities and run for the cover of fixed-income investments.

We believe investors’ asset allocations, or the division of assets among stocks, bonds and cash, have been influenced by market extremes in recent years. Now is a good time … Read the rest

Building Your Financial Safety Net

By

Investing is important for your future.

Investment planners generally recommend these initial strategies be taken before beginning an investment plan:

  • Establish a cash reserve to cover three to six months’ living expenses.
  • Do not spend more than 35% of your income to pay off debt (including your mortgage or rent).
  • Obtain adequate life insurance — generally eight to 10 times your annual family income.

Then your initial steps should be:

  1. Determine your net worth — your total financial assets minus your debts. To do this, add up the current value of all your assets — real estate, vehicles, collectibles, savings
… Read the rest

Retirement Income Planning:
Why an Appropriate Withdrawal Rate Matters

By

Accumulating enough assets for retirement may be the top priority for investors. However, the amount that is withdrawn from a portfolio each year during retirement is what may ultimately determine how long retirement assets will last. That is why calculating the annual withdrawal rate from personal savings and investments is so critical for retirees and people about to retire. It’s also a helpful exercise for younger investors who would like to gauge how much they will need to accumulate in order to provide adequate income during retirement.

Something to Consider

Several factors will influence your choice of an appropriate withdrawal … Read the rest

Perils of Retirement

By

You couldn’t wait to retire. Now you’ve done it, and your life feels unhinged. Your calendar and e-mail in-box are empty. Your spouse wants you to do anything that involves leaving the house. And you feel guilty for not being productive.

Welcome to retirement. Even those who work part-time after leaving a primary career, as most people now do, face major logistical and psychological challenges. Retirees who don’t anticipate these landmines may learn about them the hard way. But you can prepare for them,

Here are six pockets of turbulence and suggestions for how to avoid them.

1. Where did … Read the rest

Careful Estate Planning Is as Important as Ever

By

The enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (2001 Tax Act) has many investors confused about estate planning. Because the legislation steadily reduces and eventually temporarily eliminates federal estate taxes, some are under the impression that estate planning is no longer needed. This misunderstanding could prove very costly.

Thanks to the 2001 Tax Act, the amount that may be transferred upon death to a non-spouse without triggering federal estate taxes was $1.5 million in 2005. This exclusion amount has risen to $2 million in 2006 and will rise to $3.5 million in 2009, and an … Read the rest

Preserving Wealth: Planning Steps for Your Stage of Life

By

The current tax law calls for a gradual increase in how much you can leave behind to loved ones over the next several years. Then, in 2010, the entire estate tax is scheduled to be repealed, only to revert back to 2001 levels in 2011 and beyond. That is, unless Congress alters the law. As it turns out, there is a long-running debate in Congress about whether or not to change the existing law, extend the repeal beyond 2010 or even get rid of estate taxes altogether.

What does this mean for you? Be proactive and review your own estate … Read the rest

Convert Your 401(k) Into a Cash Cow

By

Why leaving money in a 401(k) isn’t a smart move.

Retirement plans, like 401(k)s and pension/profit-sharing plans, are great for building a nest egg. They give you numerous benefits, including the ability to deduct contributions from your taxable income and enjoy tax-deferred growth of earnings inside the plan. However, eventually you will have to convert your retirement plan into an ongoing income stream so you can have the money to do what you want, when you want.

When that day comes, you’re going to find that the investment choices inside your existing 401(k) are generally not the best options for … Read the rest

How to Handle a Financial Windfall

By

Everyone fantasizes about instant riches — the kind associated with hitting the lottery, learning you have a distant aunt who named you as her sole beneficiary, coming up with the next great American invention, winning a reality game show, or even finding a duffel bag full of cash along a deserted road. While these instant-riches scenarios aren’t common, people do sometimes receive a sudden windfall of money as the result of the sale of a business, rolling over a 401(k) plan, or inheriting it from Mom and Dad.

While many people think life would be easy if only they were … Read the rest

Don’t Let an Unwatched 401(k) Get Away From You

By

You have likely been in this familiar situation: You finally qualify for your company’s 401(k) plan. You meet with the company-appointed 401(k) plan administrator, decide how much of your paycheck to contribute, and select your asset allocation. Then you never think about the investment again.

And why should you? After all, you’re a long-term investor. You chose a growth investment and the person administering the plan clearly explained it to you. So you’re fine, right? Wrong!

Even if you chose a good-growth investment, if you let that investment remain without periodic examination until you retire, you could be in for … Read the rest

Preparing for the Coming Wave of Wealth Transfers

By

Rising affluence and an aging population are expected to trigger a vast transfer of wealth over the next 30 years. According to Boston College’s Social Welfare Research Institute, approximately $40 trillion or more will pass from one generation to the next by 2052. With so much wealth changing hands, the need for estate planning is bound to increase among those who pass on assets. At the same time, investment planning will be paramount for those who inherit assets.

While each situation is unique, here are a few planning thoughts for givers and receivers.

Making Wishes Happen

A variety of legal … Read the rest

Steps to Help You Gain Financial Independence

By

Many of us start our careers believing we’ll retire as millionaires, but we do little to help make that belief a reality.

That’s why a dangerous fantasy is not in disbelieving in the pot of gold, but in believing that somehow it will just appear when we need it through no effort on our part. In fact, I believe we have two choices: We can work for that pot of gold through discipline and perseverance throughout our careers, or we can end up working part-time in our golden years just to survive.

From my own observation, I’ve seen many retirees … Read the rest

CDs Are Coming Back in Style

By

With the Federal Reserve continuing to raise interest rates, some investors are taking a new look at certificates of deposit (CDs). CDs are time deposits issued by banks and thrifts across the country that are insured up to $100,000 per depositor through the Federal Deposit Insurance Corporation (FDIC).

CDs fell out of favor with many investors when interest rates hit rock bottom, but now, after the Federal Reserve’s series of interest-rate hikes since mid-2004, short-term rates hover around 4.5%, and many investors are once again turning to CDs. According to MSNBC, the amount of money invested in traditional CDs now … Read the rest

How Many Mutual Funds Is Too Many?

By

You’ve probably heard for years that diversification is one of the keys to successful money management. And as many employees of scandalized companies have recently learned, lack of diversification can mean the difference between a comfortable retirement and possibly none at all. (Note, however, that diversification does not ensure a profit or protect against loss in a declining market). But are you one of those investors who collect mutual funds like other people take aspirin? If two are good, then four must be better?

It’s easy to get into the rut of owning an overabundance of funds. You might have … Read the rest

Rep Agency Mergers and Acquisitions

By

The ability for a rep agency owner to transfer the value of his agency may ultimately depend upon his or her viability as a candidate for a merger or acquisition. Mergers and acquisitions of rep agencies have become quite common and have grown out of a number of factors from the buyer, seller and merger standpoints.

Seller

The seller can only sell his agency to either key people or a compatible rep agency in the marketplace. He may not have successors in the agency or the offer from the buyer may be too lucrative. The seller may have also lost … Read the rest

The Dow at 11,000: What’s in a Number?

By

In January of this year, the Dow Jones industrial average closed above 11,000 for the first time since 2001, causing much optimism among investors. However, as the Dow continues to hover around the 11,000 mark, the words “psychological barrier” seem to be everywhere. So, what exactly does it mean to say the 11,000 mark is more of a psychological milestone than anything else?

As the longest-running major market index, the Dow has a strong symbolic value, and gets a lot of attention from investors, the media and the general public. But as a collection of only 30 blue-chip stocks selected … Read the rest

The Simple Mistake Many IRA Owners Make

By

Most IRA owners, if asked what their major IRA concern was, would tell you it’s protecting the account from losses. Naturally, if you have $500,000 in your IRA, you are probably worried about losing it in a down market. However, there is a problem much simpler that folks keep missing which could cost your family thousands of dollars.

What is that problem? It’s the beneficiary form. Why would the beneficiary form cause so much trouble and cost so much? Because of the complexity of the laws surrounding the beneficiary designation and the lack of knowledge of most investors (and unfortunately … Read the rest

A Win-Win With Charitable Giving

By

We’ve all heard the saying: it’s better to give than to receive. While this is true, when you make a charitable gift to a nonprofit organization you are not only giving to a good cause, but also putting yourself in a situation to receive several tax advantages as well.

The exact tax advantages you receive actually depend on the type of gift you make and the organization to which you give. For example, if you give $10,000 in cash to a charitable group this year, you could deduct $10,000 from your taxes on your 2005 tax return. And while there’s … Read the rest

Plan Ahead to Reduce Next Year’s Taxes

By

The key to reducing your income taxes is to plan ahead. Far too often, individuals wait until it is time to file their tax return, and by then it is too late for many of the tax-reducing strategies. A little organization and planning can lead to significant savings on your income taxes. Listed below are three options to consider when planning your tax reductions.

Retirement Planning

If your company offers a retirement plan, such as a 401(k), and you are not taking advantage of it by contributing, you are losing out on a significant tax savings opportunity. Any contributions you … Read the rest

Need a Better Way to Save For Your Retirement? Consider the Solo 401(k)

By

Retirement plans are a key benefit most people look for when seeking employment. But what happens when you work for yourself? When you strike out on your own, you hope to increase your income, increase your work flexibility, and experience the luxury of answering to no one; however, when you leave your employer, you leave behind the security of traditional retirement investment plans, such as corporate 401(k)s.

Sole proprietors often rely on IRAs as the method of savings for retirement when they first start out. But the amount of money one can contribute to an IRA is limited, which doesn’t … Read the rest

Defined Benefit Plans: Breathing New Life Into a Coveted Benefit

By

Mention defined benefit plan to most employees and their reaction is, “Wouldn’t that be nice.” Defined benefit plans — where employers set aside money in a retirement plan that guarantees benefits after a certain number of years of service — have been in rapid decline for more than a decade.

Why? Ask employers: High cost, complex regulations and actuarial calculations, potential under-funding issues.

Pose the same question to a small business: “Totally out of the question” is the likely response. In actuality, a defined benefit plan may be one of the most accessible — and desirable — benefits for a … Read the rest

Invest Time in Reading Your Retirement Account Statement

By

If you’ve been participating in your company’s 401(k) plan, chances are you recently received a retirement account statement in the mail. Federal law requires your employer to send you a 401(k) account statement at least once a year, but whether you receive yours annually or quarterly, do you really know how to read it?

Many statements are designed in a way that allows you to review and evaluate your account assets, current activity and investment information. Basically, they should show a summary of your account at the beginning and end of the quarter (or year).

The first thing you should … Read the rest