Protect Your Wealth

Thursday, May 16, 2013

The 5 REAL Reasons to Hire a Financial Advisor

If you believe much of the media, you hire a Financial Advisor to try to outperform the stock market. Never mind that this can have very little bearing on whether you can live or retire as you would like. Never mind that research has shown that even the hottest hedge fund managers struggle to outperform the markets. (Ok, they don't struggle to; they don't).

The better reasons to hire an Advisor:

1. Press you to answer questions you don't want asked, like how you plan to take care of your aging parents if you need to, whether your will is up to date, how you are going to send your kids to college, what you will do if you lose your job. These are the types of questions that make most of us too uncomfortable to ask ourselves.

2. Put together a financial plan. Very few people ever, ever do this on their own. And most drag their feet on doing it with their Financial Advisor, too. It takes time and it can hurt. But it matters.

3. Identify risks in your portfolio that you might look right past, like being overweight in the US (which most of us are in the US) or being mostly invested in tech stocks, when you're in the tech industry.

4. Talk you through market volatility. Most of us energetically claim we don't need this. It's hard to project forward an image of ourselves being nervous or scared, and our recollection of past pain has been shown to fade over time. (Just ask any woman who has been through childbirth more than once!) But another voice besides your own during though markets can be invaluable.

5. Identify your biases. This is a biggie. Many of us think we don't really have any.....which is exactly the point. One big one: women tend to be more risk-averse than men. That is neither good nor bad of itself, but it is something that should be tested and pushed at a bit, given that women as a group also earn less and live longer than men. As a result, they could perhaps tolerate a bit more risk.

Yes, Financial Advisors cost. But if they are able to provide the services above--and particularly if they can do it earlier in one's investing life--their value can be meaningful.

Article source:

http://linkd.in/104PW7m

Thursday, March 14, 2013

Spring Break 2013-Ideas for Families

It's that time again! Spring break is here! Now for most, Spring break has held a reputation of being a time that merely college students can enjoy with late nights and partying. However, families are not immune from Spring Break fun! When selecting the right destination for Spring Break, you may want to consider a destination that appeals to all ages, to avoid boredom for anyone on the trip. A family trip to Orlando, Florida may be the best choice for you and your family. Orlando is known for housing a "world" the size of Boston-Walt Disney World which includes a total of four theme parks, two water parks, Downtown Disney entertainment zone, and twenty-two themed resorts, beaches, and much more. With this much variety, everyone in your party will find something fun to do! If you are looking for a destination with sun and snow, California has much to offer. Northern California visitors can enjoy time in San Francisco, which has plenty of sightseeing for families--but do not expect hot weather during this time! Another great location is located on California's central Pacific Coast is Monterey Bay which, is home to a major aquarium and a great place to catch a glimpse of sea lions and sea otters. You will even find beautiful beaches in Monterey, CA however, water may be a little too cold to have fun in! In Southern California, you will find a lot more fun in the sun! The best attractions includes Disneyland, Universal Studios Hollywood, Knott's Berry Farm, Lego land, Huntington Beach, Six Flags Magic Mountain-just to name a few. California also offers skiing in Mammoth Mountain in the Sierra Nevada range. Another adventurous destination is Hawaii which, offers great deals during this time of year and is a family friendly vacation spot. So whether you're looking for sun, snow, or cold, these are great options for a spring break vacation that your family will remember!

Wednesday, June 13, 2012

Inheriting a Loved One's Retirement Assets

Your options in managing retirement assets depend on whether the deceased was your spouse and also on the type of retirement account (401(k)/403(b) plan, IRA, or annuity) that you inherit.

Callout:

Understanding an employer-sponsored plan's rules for beneficiaries is critical when making decisions about the bequest.

Social Media Message:

If you have inherited retirement assets, pay attention to IRS rules governing the bequest.

If you recently inherited retirement assets from a deceased loved one, it is important to pay attention to IRS rules that govern this type of bequest. Your options in managing this money typically depend on your relationship to the deceased and the type of retirement account (401(k) or 403(b) plan, IRA, or annuity) that you inherited.

Employer-Sponsored Plans

When inheriting a deceased spouse's assets within an employer-sponsored plan, you are not required to pay federal estate or income taxes if the assets are left intact within the estate. After age 70½, you must begin required minimum distributions (RMDs) based on your life expectancy. The formula for calculating the RMDs, which are taxed as ordinary income, is available in IRS Publication 590. This withdrawal schedule typically is preferred to cashing out the entire bequest at once, which is likely to trigger higher tax payments.

If the deceased was not your spouse, the plan's rules generally determine your course of action. Depending on the plan, you may have one or more of the following options: Leave the money in the plan, transfer the money to an IRA created for this purpose, or elect a cash distribution.

Some employer plans offer nonspousal beneficiaries the option of completing a trustee-to-trustee transfer from an employer-sponsored plan to an IRA established for this purpose. The nonspousal beneficiary is required to take annual distributions based on the beneficiary's life expectancy. Note that in this type of scenario, the IRA is opened in the decedent's name for the beneficiary's benefit, and assets transferred to the IRA cannot be comingled with other IRAs that the beneficiary may have established.

In other instances, employer plans can default to a five-year payout rule and require nonspousal beneficiaries to empty the account within five years of the death of the deceased. Distributions taken by nonspousal heirs are taxed as ordinary income.

Before taking any action, it is critical to determine the rules of the deceased's retirement plan and consult a financial advisor or a tax advisor to make sure that you avoid unnecessary taxes.

IRAs

When inheriting a traditional IRA from a deceased spouse, you may designate yourself as the account owner and treat an inherited IRA as your own. This means you can transfer the assets to an existing IRA. These transfers typically do not trigger tax payments as long as you follow the rules for trustee-to-trustee transfers. You may also begin taking distributions, which are taxed as ordinary income. With a traditional IRA, after age 70½, you are mandated to take annual RMDs, which are based on your life expectancy and are taxed as ordinary income.

If the deceased was not your spouse, you cannot transfer assets within an inherited IRA to your own existing IRA. Instead, you have two options: You may take all distributions within five years of the decedent's death or take annual distributions determined by the life expectancy of you or the decedent, whichever is longer.

Annuities

If you receive a survivor annuity, the tax status of periodic payments to you is determined by how much the decedent paid for the annuity contract, which is known as the cost basis.1 If the decedent did not pay for the contract (for example, if it was provided by an employer), periodic payments to you are taxable. Assuming the deceased had a cost basis, the amount up to the cost of the contract is not taxable, but amounts in excess of the deceased's cost are taxed as ordinary income.

Because determining the tax status of annuities and other inherited retirement assets can be complicated, you may want to consult an estate planning attorney or a financial advisor to answer any questions you may have.

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Source/Disclaimer:

1An annuity is a long-term, tax-deferred investment vehicle designed for investment purposes and contains both an investment and an insurance component. They are sold only by prospectus. Guarantees are based on the claims-paying ability of the issuer and do not apply to an annuity's separate account or its underlying investments. The investment returns and principal value of the available sub-portfolios will fluctuate so that the value of an investor's unit, when redeemed, may be worth more or less than their original value. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal.

Required Attribution

Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

June 2012 — This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by Sierra Pacific Financial Advisor, a local member of FPA.

Tuesday, March 13, 2012

Educational Tax Workshop

Sierra Pacific Financial Advisors (SPFA) will host an educational workshop to better assist you in tax filing for 2011. Several professionals and CPAs will conduct a workshop and lively answer all your questions regarding taxes. During the workshop, you will learn:

1. The interesting interest deductions

a. Five types of interests, the good, the bad, and the impossible

b. Two strategies, simple and complex, to minimize your taxes

c. One trap to avoid

2. Your sweet home and retirement account

a. Most valuable asset as well as tax shelters

b. investment options for both tangible and non-tangible assets

3. Small business and self-employment

a. Top 10 tax deductions for small business owners and self-employed

b. Book keeping system for small business

When: March 23rd, Friday at 6:30pm - 9:30pm

Where: SPFA Fremont Main Office

39899 Balentine Drive, Suite 200

Newark, CA 94560

Due to limited space, the workshop will only open for the first 20 people. Please RSVP no later than Wednesday March 21, 2012 via email at info@sierrapfa.com. Light refreshments and soft drinks will be provided.

Thursday, March 1, 2012

New Wrinkle In Pre-59½ IRA Withdrawals

If you take money from your IRA before age 59½, you’re generally required to pay a 10% penalty to the IRS, in addition to the regular income tax that’s normally due on that money. But there’s a key exception. You can take a series of “substantially equal periodic payments” (SEPPs) from the IRA without penalty (though you’ll still owe income tax). To qualify, the SEPPs must continue for at least five years or until age 59½, whichever is later. And you have to use one of three basic methods for determining how much to take out. Make a mistake or change your method, and you’ll generally have to pay the price—being liable for the 10% penalty after all.
Now, though, in a surprising private letter ruling (IRS PLR 201051025), the IRS allowed a taxpayer to avoid the penalty tax, even though three glaring mistakes were made in calculating his periodic payments.

Here’s what happened. The taxpayer—let’s call him John—was younger than 59½ when he arranged to receive SEPPs from his IRA. He instructed the custodian for his account to distribute the initial SEPP in a single sum in Year 1 and in equal monthly installments thereafter.
Mistake #1: John discovered that the IRA custodian had distributed an incorrect amount for the first month of Year 2. Subsequently, he directed the custodian to make a corrective distribution from the IRA, taking the shortfall into account.
Mistake #2: The IRA custodian distributed an incorrect amount from the IRA in the second month of Year 2. This shortfall was also covered by a corrective distribution for the first two months of Year 2.
Mistake #3: The IRA custodian made only 11 monthly distributions to John, instead of payments in the usual 12 months, in Year 6. John only learned of the error when he reviewed the Form 1099 for the year. He then proposed to receive a “make- up distribution” in Year 7 that would satisfy the annual payment distribution requirement for Year 6.
John submitted a request for a ruling from the IRS that the corrective distribution proposed for Year 7 and the corrective distributions in the previous years would not be treated as a modification of the SEPP payments. The IRS accepted his arguments, absolving John of all blame and concluding that he wasn’t subject to the 10% tax penalty in this situation.
As encouraging as that leniency may seem, however, there’s no reason to expect it to happen regularly. In the past, similar taxpayer mistakes have been penalized. For example, the tax agency recently imposed the 10% penalty when a mistake by a taxpayer’s financial advisor resulted in two trustee-to-trustee transfers mistakenly being made at the same time (IRS PLR 20070023). So the best approach is to get things right from the outset. We can work with you to avoid costly mistakes.