Category Archives: investing

When is $1 million not really $1 million?

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Congratulations! You have finally reached full retirement and you have accumulated $1 million in your retirement accounts. But do you really have $1 million?

Withdrawals from your retirement accounts, 401k, 403b, regular IRA’s, are fully taxable at ordinary income tax rates. After taxes, your $1 million may be closer to $750,000 or less.

It is important to decide which accounts to tap into first for your retirement income. Most retirees feel it is better to tap into taxable accounts first. This is, however, not always the best choice. You need to know what your tax bracket is in order to make the best choice for you. The wise decision might be to withdraw from both taxable and tax-deferred at the same time.

Please feel free to call me or send an email to nancy@financialgroup to determine what might be your best choice

I have a mutual fund I would like to give to my Grandson. He is a Senior in High School, is this a good thing to do?

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Perhaps it is a good thing, perhaps not. If your Grandson needs to apply for financial aid, it would be best to keep the mutual fund in your name. If you keep the fund in your name, he will not have to report it as an asset.
If you wish to give it to him specifically for college, a better path might be to change the title of the account from your name to a 529 college savings fund with you as the custodian.

I turned 70 1/2 last year and I have to take my first RMD by April 1st. How do I calculate what I need to withdraw?

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April 1 is the date of your first withdrawal the year after you turn 70 1/2. After the first year, your annual RMD must be withdrawn by 12/31. If you are still working and contributing to a 401k, you do not need to take withdrawals from the 401k until you do retire.

If you go to www.irs.gov and look for publication 590 you will find the withdrawal tables to be used.

How much do you care about your future self?

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If you care a lot about your future self, you will save more. If you care a little, not so much. The question then becomes – how can you save more than you already are? In the past we have discussed the “Latte Factor.” If you cut back the premium drinks you buy each week from one a day to 3 a week, you can save $10/week or $520/year. While this small change may not seem like much it does add up.

Another trick to keeping your savings is to open up an account with a banking institution that is not close to work or home. It is a chore to deposit into this account and a chore to withdraw. You pat yourself on the back for going out of your way to save for your future and give yourself another big pat for not making the trip to withdraw. Accounts that are not convenient make us think twice about withdrawing from them until we really need to.

Saving is what we have after we finish spending. If we can control spending we will be much better off

I am 65 and ready to retire. My employer is offering a lump sum of $300k or a single life annuity of $2000/month. Which do I take?

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If you take the lump sum and live another 18 yrs, you will need to earn 4.16% annually to match the $2000/month.  If you live longer, the annual return will have to increase.  The monthly income is known but that does end at your death so you will need to make other provisions for your spouse.

Tax time is always a stressful time of year; it is made worse if you are going through a divocre.

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I have a couple of friends in this situation and even the amicable ones are arguing over the tax issues. Here are a few key issues:

Do you file joint or single for the year of the divorce? Is filing as head-of-household better?

Who gets the exemption for the kids? Do we split the exemption?

How will you split your assets? Often, 50/50 based on dollar value is the basic but you need to look at cost basis; is an asset tax-free or tax-deferred.

Is there going to be alimony or child support? Make sure you know which of these will impact your taxable income for the coming years.

There is a lot of pain in divorce. By consulting a qualified tax professional your tax return can be less painful.

I am an Audi girl. I love the look of the car, the drive, and how safe it is.

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What I don’t love is having to use premium gas. I get gas every Sunday at the same station because I want to track the prices. I could not believe that last Sunday the price per gallon was up 10 cents. Every other week the price has been creeping up at about 4 cents a gallon. So what’s a girl to do?

I try to never let my tank go below half full. By doing this, I will not faint next to the pump when I fill up and embarrass myself. Here are a few more tips for saving at the pump:
Keep your tires properly inflated. This is the easiest fix to increasing your gas mileage.
Remove heavy items from your trunk. Excess weight in the car can increase drag and increase gas consumption.
Drive the speed limit. Constant stopping and starting could cost an additional 15-28 cents per gallon.

So have fun out there and be safe. Happy driving.

I do not have a crystal ball in regard to the Middle East, but I have been doing my homework.

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 I have been reading a lot of newspapers, both foreign and domestic. I have listening to a lot of news, and talking to a lot of people both here and from Israel. I and the other planners in our office have had meetings to discuss what might happen. I feel that Israel will take action against Iran. This can happen anywhere between mid April and October. A global sanction seems to be slowing things down a bit for Iran but certainly not stopping them. Beyond these sanctions, we do not know what our government will do to stop a potential strike again Israel. The only country to state that they will step in is England but these issues are often decided quietly and we learn of the results after the fact.
It is important that you review your investments and discuss any changes that need to be made while things are still somewhat calm.

You did some belt tightening along with everyone else over the last few years.

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 No longer do you buy premium coffee 7 days a week, you have switched to some store brands at the grocery, and you are driving a lot less. My question to you is, “are you saving what you are saving?”
Let’s look at what I will call “The Latte factor”. If you have in fact start brewing your own, then you are saving about $1092/year. But, are you truly saving that money? By brewing at home you can be saving $21/week. Are you putting that extra $84/month in your saving account or are you feeling a little flush and going out to dinner? I know a lot of people are suffering from frugal fatigue, but be strong! Lifestyle changes can be hard, but the extra money in your bank account makes it so much easier.