Money-Guy 01-28-2010

Well here it is; we finally did it. You have been writing, calling, and asking for us to explain and go through the nuts and bolts of the Roth conversion and why 2010 is such an important year. You can’t really turn on any financial media or read any financial literature and not come across something that at least mentions or alludes to the this planning opportunity.

So what is so different about the year 2010? Well, there are actually two big differences:

1. Anyone can do it no matter what their income.
2. The taxes resulting from a Roth conversion made in 2010 can be deferred over the following two years (2011 and 2012).

Why would you want to have money in a Roth IRA? With a Roth, contributions are made with after-tax money. Simply put, there is no immediate tax benefit from putting money into a Roth IRA. However, that money is allowed to grow tax-free and withdrawals in retirement are tax-free as well assuming certain conditions are met. Not only this, but there are also no Required Minimum Distributions associated with Roth IRAs when you reach age 70 and a half.

As you listen to the show, I will walk through the ins and outs of the process, who it makes sense for, and also who it does not make sense for. As a summary, if any of the following describe you, then you may be a good candidate for the conversion:

• You can convert at low or no cost
• Your taxable income is likely to be higher in retirement
• You anticipate higher tax rates during your withdrawal period
• You can defer Roth balances past when Required Minimum Distributions are scheduled to begin
• You seek to potentially maximize after-tax dollars passed to heirs
• You have outside cash to pay any additional taxes.

I also explain our analysis on how we make the determination for our wealth management clients of whether to convert or not, and, if so, how much they should convert. Hopefully as you listen, you will recognize the questions you should ask and the thoughts you should have to determine if this is a planning opportunity you should take advantage of.

You will also hear me share some listener emails in the show today. This show is produced for you, the listeners, and you have no idea how much we value your comments and feedback! Please keep them coming so that we can provide you with the content you want to hear.

Money-Guy 01-12-2010

Well, I’ve missed you guys. We took a few weeks off for the holidays, and I can only hope that absence has made the heart grow fonder. I thought a great way to start out this new year of financial topics was to touch on an area that I think a lot of people are probably thinking about right now. I’m sure many individuals have made the resolution for 2010 to get their financial house in order and, as part of that, get serious about saving for retirement.

It comes as no surprise that, considering the economic downturn of 2008 coupled with the significant recovery of 2009, many individuals don’t really have a good grasp of how they are doing in saving for retirement or, if they are already retired or nearing retirement, don’t know if they have enough to last.

This is the exact topic that was discussed in the February 2010 edition of Consumer Reports. In an articled tilted A happy retirement: 6 steps that work, the author walks through a study and survey that Consumer Reports did on currently retired and nearly retired individuals. In addition to some really good stats, the article also shares 6 steps to a successful retirement. As you listen to the show, I will expand on each of these:

1. Live Modestly – Spend less than you make and don’t live beyond your means.
2. Maximize Your Savings – If your employer offers an incentive match on your retirement plan, make sure you are taking advantage of that. It is FREE money!
3. Reduce Debt – Being debt free or near debt free is almost a must in retirement. There is a significant psychological change that happens when an individual enter into retirement and it sure is nice to not have that additional debt burden.
4. Don’t Invest Too Conservatively – Because of diversification, taking even a moderate amounts of risk can pay off. You don’t have to go out on a limb to get the best return. Adding multiple “risky” asset classes can actually reduce the overall risk of your portfolio.
5. Study Your Options – Always have a plan B. When determining your retirement goals be sure to come up with both a best case and worst case scenario.
6. Take The Intangibles Seriously – Remember that money is only a tool to help you reach your goals.

As you listen to the show I also share some insights from Dr. Thomas Stanley, author of “The Millionaire Next Door” and the newly released “Stop Acting Rich…And Start Living Like A Real Millionaire“. His new book is incredible, and he shares some pretty incredible thoughts on what it really means to be wealthy and successful.

Money-Guy 12-04-2009

As we wind down 2009, what sort of things should you be thinking about? Well, in my life, it seems like every December there are a million things going on both on the personal side and on the business side. In today’s show, I want to focus on two things that I bet you and your family are thinking about, and if you’re not thinking about them, maybe now is a good time to start.

Since this is a personal finance show, it should come as no surprise that the two issues I want to talk about involve money. Whenever money or finances are talked about, there is always one consideration that you cannot avoid and seems to have an impact on almost everything, and that issue is… taxes!

As you listen to the show, I touch on four tax topics that you should probably consider:

1. Loss Harvesting – Even though 2009 has been good to us in the form of market performance, and you were probably able to harvest more than enough losses at the end of last year, there may still be some holdings in your portfolio that can provide you with an opportunity to lock in losses. For those who don’t know, tax loss harvesting is the practice of offsetting your capital gains liability by selling securities at a loss. Remember, too, that if you have a net excess loss in any year (including carry forward from previous years) you can use a portion ($3,000)  to offset your ordinary income.
2. Year-End Capital Gain Distributions – Make sure that if you are purchasing mutual funds at the end of the year, you know when and if they are issuing large capital gains distributions. The last thing you want is to pay taxes on gains that you weren’t able to participate in!
3. Changes to Home Buyer Credit – There have been a number of changes to the 2009 first-time home buyer credit including some that can even benefit current homeowners. Check out this link for the IRS’s press release. As you listen, I also share two personal stories that may help you with the entire process.
4. 2010 Roth Conversion – Even though this is a great planning opportunity for some, you need to take a look at your individual situation to decide if it is a good move for you. Here are some of the considerations we discuss in the show:

• Total IRA balances taken into account. Potentially rolling IRAs back into qualified plans.
• Outside cash to pay taxes.
• Tax rates now vs. tax rates in the future.
• Years to accumulate vs. years to distribute.
• Tax diversification.
• No Required Minimum Distributions for retirees in 2009.

The second thing that may be on your mind as we wind down this year is shopping (whether it be for others or buying for yourself). As you listen, I give you my “tried & true” method and process for getting the very best deal out there which will allow you to stretch your dollars as far as possible! As always, if you have any questions or thoughts, feel free to leave them below!