PWM - Financial & Investment Advisors in New Jersey | Private Wealth Management - Registered Investment Advisor, RIA | NJ, NY, PA, FL http://www.pwm-nj.com Tue, 15 Apr 2014 12:49:02 +0000 en-US hourly 1 http://wordpress.org/?v=3.8.3 Get Your Estate Plan in Gear http://www.pwm-nj.com/knowledge/investment/estate-plan-in-gear?utm_source=rss&utm_medium=rss&utm_campaign=estate-plan-in-gear http://www.pwm-nj.com/knowledge/investment/estate-plan-in-gear#comments Tue, 15 Apr 2014 12:49:02 +0000 http://www.pwm-nj.com/?p=9611 more]]> image of housing

Creating or Updating an Estate Plan

Estate planning laws have undergone swift changes over the past several years and may change again in the years ahead. If you’re creating or updating an estate plan, it’s essential that you seek the advice of an attorney who’s well versed in this area. Before you hire an estate-planning attorney to draft or update your estate plan, it’s important to understand your role in the estate-planning process.

Find a qualified attorney: Because your estate plan will likely need to be updated as the years go by and your personal circumstances change, it makes sense to find an attorney who practices in the community where you live. This can help you meet with him/her on an ongoing basis.

Take stock of your assets: Before you meet with your attorney, spend some time enumerating your assets and their value: your investment accounts, life insurance, personal assets such as your home, and your share of any businesses that you own. Also gather current information about any debts outstanding. Your estate-planning attorney is likely to provide you with a worksheet to document your assets and liabilities, but it’s helpful to collect this information in advance.

Identify key individuals: Another important aspect of estate planning is identifying the individuals you trust to ensure that your wishes are carried out once you’re gone.

Executor: A person who gathers all of your assets and makes sure that they are distributed as spelled out in your will.

Download a Free Version of our Estate Plan Checklist »

Durable (Financial) Power of Attorney: A person you entrust with making financial decisions on your behalf if you should become disabled and unable to manage your own financial affairs.

Power of Attorney for Health Care: A person you entrust with making health-care decisions on your behalf if you are disabled and unable to make them on your own.

Guardian: A person who would look after your children if you and your spouse were to die when your children are minors.

Know the key documents you need: When you meet with your estate-planning attorney, he or she will make recommendations about your estate plan. At a minimum, you should ask your attorney to draft the following documents. Last

Will and Testament: A legal document that tells everyone, including your heirs, how you would like your assets distributed after you’re gone.

Living Will: A document that tells your loved ones and your health-care providers how you would like to be cared for if you should become terminally ill; usually includes details about your views toward life-support equipment.

Durable (Financial) Power of Attorney: A document that gives an individual the power to make financial decisions and execute financial transactions on your behalf if you are unable to do so.

Medical Power of Attorney: A document that gives an individual the power to make health-care decisions on your behalf if you are unable to do so.

Manage your documents: Once your estate-planning documents are drafted, destroy any older versions of them. Notify your executor of the whereabouts of your estate-planning documents, and provide copies of the relevant documents to your executor, powers of attorney, and the guardian for your children.

Plan to keep your plan current: Last but not least, plan to keep your estate plan current. One of the biggest estate-planning pitfalls is drafting an estate plan but not keeping it up to date. Changes may include change in marital status, assets, financial status, death or ill health of your beneficiaries, executor, power of attorneys, or guardian.

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit: 

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Find the Right IRA in Three Easy Steps http://www.pwm-nj.com/knowledge/investment/find-the-right-ira?utm_source=rss&utm_medium=rss&utm_campaign=find-the-right-ira http://www.pwm-nj.com/knowledge/investment/find-the-right-ira#comments Mon, 14 Apr 2014 12:59:08 +0000 http://www.pwm-nj.com/?p=9600 more]]> image of beach

Traditional IRA or Roth IRA?

Even if you’re already convinced that saving in an IRA is a sensible thing to do, there’s still a little bit of research to conduct. There are two main types of IRA accounts, and selecting the one that’s best for you can be a daunting process. You can figure this out in relatively short order by following these three steps.

1) Know the Basics: Understanding the difference between the two types of IRAs—Roth IRAs and traditional IRAs—is the key first step in determining which is suitable for you.

Both vehicles let you sock away money and enjoy a tax benefit. With a traditional IRA, you won’t have to pay taxes on your IRA’s investment earnings until you begin taking distributions from it during retirement; thus, your money enjoys the benefit of tax-deferred compounding. (That means you’ll have to pay taxes on your earnings when you begin withdrawing money, but not as you go along.) The Roth, however, has a couple of huge advantages over a traditional IRA. Whereas traditional IRAs carry restrictions governing when you have to begin taking distributions, the Roth carries no such restrictions; you won’t be forced to take distributions at any age. And perhaps even more significantly, qualified distributions from a Roth will be tax-free, not tax-deferred as is the case with a traditional IRA.

With that information, the choice might seem clear: Roth IRA all the way. But there are a few other issues to consider. For those who qualify (consult a tax professional or the IRS’ site to determine if that’s you), a traditional IRA provides up-front tax savings. All of your contribution to a traditional IRA plan could be tax-deductible. Contributions are not tax-deductible with a Roth IRA.

2) Determine Your Eligibility: Okay, you’ve now identified the account type that suits you, but there are eligibility hurdles you’ll have to clear in order to use a traditional IRA or a Roth IRA.

Let’s start with the most sweeping limits first. For 2014, according to IRS Publication 590, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is: more than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er); more than $60,000 but less than $70,000 for a single individual or head of household; or less than $10,000 for a married individual filing a separate return.

For 2014, according to Publication 590, you cannot make a Roth IRA contribution if your modified AGI is $191,000 or more if your filing status is married filing jointly; $129,000 or more filing single, head of household, or married filing separately, and you did not live with your spouse at any time in 2014; or $10,000 or more if your filing status is married filing separately and you lived with your spouse at any time during the year.

3) Weigh Your Options: You may find that certain IRA types are automatically off limits to you because of your income level. But what if you establish that you’re eligible to make more than one type of IRA contribution—for example, you can contribute to a Roth and make a deductible contribution to a traditional IRA? You may decide to do both if you have the money to do so, but if you have a limited sum of money to invest, the decision becomes a bit tougher. For a situation like this, as well as to keep abreast of the latest rules and regulations pertaining to IRAs, it would be in your best interest to consult with your financial advisor/tax professional.

Funds in a traditional IRA grow tax-deferred and are taxed at ordinary income tax rates when withdrawn. Contributions to a Roth IRA are not tax-deductible, but funds grow tax-free, and can be withdrawn tax free if assets are held for five years. A 10% federal tax penalty may apply for withdrawals prior to age 59 1/2.

 

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit: 

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How Best To Leave IRAs To Your Grandchildren http://www.pwm-nj.com/knowledge/investment/ira-grandchildren?utm_source=rss&utm_medium=rss&utm_campaign=ira-grandchildren http://www.pwm-nj.com/knowledge/investment/ira-grandchildren#comments Wed, 02 Apr 2014 12:58:00 +0000 http://www.pwm-nj.com/?p=9577 more]]> image of baby hand -PublicDomainPictures

Would you like to set aside money for your young grandchildren?

One way to do that without giving up control over the assets is to leave one or more of your IRAs to the grandkids. If you handle things correctly, the youngsters have to take only minimal distributions during their lifetimes, enabling the funds to grow and compound for decades.

But you still have obstacles to overcome. Significantly, a minor child can’t inherit an IRA outright. As an alternative, you generally can designate either a grandchild as the beneficiary of your IRA and appoint a custodian to oversee the account, or you can leave the IRA to a trust. With the latter, you still can dictate how the money will be used after you pass away.

Let’s take a closer look at these two main options.

1. Name the grandchild as the IRA beneficiary. Typically, you might appoint one of your grandchild’s parents—your son or daughter—as custodian for the account. Also, remember to name a backup in the event your first choice is unable to serve. Fail to make contingency plans and the entire matter may end up in court, with whoever is seeking guardianship for the IRA having to ask to be appointed as custodian.

If you’re going this route, check with the financial institution or brokerage firm holding the IRA to make sure it permits minors to be named as IRA beneficiaries. Not all companies do, but it’s relatively easy to move the funds to an institution that does allow it.

This arrangement can be simple and effective, but there’s one potential downside. Once grandchildren reach the age of majority (usually 18 or 21) in the state where they live, the money is legally theirs. Instead of investing the funds over the long term as you envisioned, the grandchild might rush out and buy a Range Rover or splurge on an exotic vacation.

2. Name a trust as the IRA beneficiary. This may the optimal approach if you’re concerned that a young beneficiary will squander the money. All you have to do is set up a trust (the fees generally are reasonable), designate it as the IRA beneficiary, and choose a grandchild as the beneficiary of the trust.

This will give you greater control. For instance, with a trust you can dictate when the money can be spent or what it can be spent on. In addition, the trust terms could require the grandchild to take distributions over his or her life expectancy, or the trust could dole out specified amounts on a predetermined schedule.

Note, however, that a trust likely won’t provide any tax benefits. Investment earnings will be taxed to the trust while the funds accumulate, and the annual tax rate for the trust frequently will be higher than the rate a youngster would have paid. For 2014, a trust with an income of $15,000 a year is in the top 39.6% tax bracket, while the grandchild would pay a maximum rate of only 15%.

To avoid that problem, you could convert some or all of your traditional IRA funds into a Roth IRA. The conversion is subject to current tax, but this may ensure future tax-free payouts.

Time Is On Your Side

No matter which method you use, time is a valuable ally. Heirs of both traditional and Roth IRAs can stretch the tax advantages by taking “required minimum distributions” (RMDs) over their life expectancies. While distributions from a traditional IRA are taxable, payouts from a Roth IRA are tax-free.

Because of differences in life expectancy, a younger heir will have to withdraw less money than an older one. For example, the first RMD for a 10-year-old inheriting a $200,000 IRA that grows 6% a year would be around $2,950. In comparison, a 20-year-old inheriting that IRA would get an initial RMD of about $3,400. The amount that must be withdrawn increases each year, but it will be small enough that much of the account can continue to grow.

Like your own RMDs, these are based on both age and account balance. Going back to the previous example of the 10-year-old, the second distribution would increase to about $3,130. By the time that heir turns 68, assuming the same 6% annual growth, the account would be valued at roughly $1.3 million, with an RMD of about $89,560. Of course, these figures are hypothetical and not indicative of any particular investment.

Finally, if you’ve made nondeductible contributions to an IRA, keep detailed records of those contributions. When the contributions are withdrawn, they aren’t taxable, but the paperwork may be needed to prove it. Otherwise, your heirs could end up paying tax they don’t actually owe.

It may be wise to divide up IRAs based on the respective ages of grandchildren. Consider all your options carefully. We’re available to provide guidance.

Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section.This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved. Photo Credit:  PublicDomainPictures

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]]> http://www.pwm-nj.com/knowledge/investment/ira-grandchildren/feed 0 Markets May Not Be Certain, But Experience Is http://www.pwm-nj.com/knowledge/investment/experience?utm_source=rss&utm_medium=rss&utm_campaign=experience http://www.pwm-nj.com/knowledge/investment/experience#comments Tue, 01 Apr 2014 13:09:02 +0000 http://www.pwm-nj.com/?p=9569 more]]> image of a hot air balloon - LFitts

Have you ever wished you could do it all over again?

Experience can be a great teacher, and it’s natural to imagine that with the benefit of hindsight you would have made better decisions about everything from raising your children to managing your financial affairs. And while that may or may not be true, what is certain is that you can offer younger family members some of the insight you’ve acquired along the way.

Here are some thoughts you might pass along:

When you get a pay raise or a new higher-paying job, consider earmarking at least part of the additional money for retirement savings. You’ll be amazed by what tax-deferred compounding can do to even relatively small sums over the course of several decades. And using raises to increase your contribution to a 401(k) can be relatively painless. Ratchet up your saving rate by a percentage point or two each year and you’ll soon reach the maximum for annual pre-tax contributions to 401(k)s and similar employer-sponsored plans—$17,500 in 2014 if you’re younger than age 50. Beginning at 50, you’ll be eligible to save an extra $5,500 a year.

Try to resist the siren song of early retirement. Leaving your job in your 50s may be tempting, but it runs counter to several financial realities. Most people have not saved enough to retire comfortably even at the traditional age of 65, and quitting early can mortgage your future in two ways—reducing the amount you can save while extending the time that your savings must support you. By the same token, however, every year you keep working improves your situation. Moreover, as life expectancies increase, more and more people find they want to stay on the job at least part time, and not only for financial reasons. Working can help keep you engaged and healthy, particularly if you find something you really like to do.

Consider postponing Social Security. You can begin receiving benefits as early as age 62, but each year you delay will increase the amount of your monthly payment, and if you wait until age 70, you’ll get 76% more than if you had started drawing benefits at 62. And most people will live long enough to get a larger total payout if they begin later.

Don’t feel like you have to go it alone in making financial decisions. Working with an advisor could help you make sense of complex financial markets and chart a comfortable path toward your goals. The right advisor can assist you in deciding how much to save, how to allocate your investments, how to weigh the pros and cons of buying a home and other major financial choices, and, when the time comes, how to deploy your retirement nest egg.

Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section.This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved. Photo Credit:  

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Five Estate-Planning Tasks That You Shouldn’t Put Off http://www.pwm-nj.com/knowledge/investment/estate-planning-to-dos?utm_source=rss&utm_medium=rss&utm_campaign=estate-planning-to-dos http://www.pwm-nj.com/knowledge/investment/estate-planning-to-dos#comments Wed, 19 Mar 2014 13:00:05 +0000 http://www.pwm-nj.com/?p=9559 more]]> image of monkeys - JamesDeMers

Estate Planning To-Dos

Keeping tabs on the estate-planning rules during the past few years has been a little like watching Olympic-level table tennis: The action moves quickly, and it’s difficult to keep up. However, no matter how laws and rules change, there are a few basic tasks that are actually pretty evergreen and that everyone should execute. Five such estate-planning to-dos are outlined below.

1) Update Beneficiary Designations. Even people who have never set foot in an attorney’s office may have laid the groundwork for an estate plan if they filled out beneficiary designation forms for their financial accounts. Those designations, in fact, trump other estate-planning documents when it comes to distributing assets, so it’s worthwhile to periodically review them to make sure they’re up-to-date with your current situation—if you’ve gotten married or divorced, for example. (How would your spouse feel if you inadvertently left your 401(k) account to your brother?) People who have drafted estate-planning documents such as wills should ask their attorneys to help them review beneficiary designations to ensure that they sync up with other estate-planning documents.

Download a Free Version of our Estate Plan Checklist »

2) Designate Legal Guardians. Parents of young children should designate legal guardians who will look after their children if the parents should die or otherwise be unable to care for their minor children. It is important to focus the discussion on actual child-rearing abilities and willingness to do the job. What is not helpful is to get hung up on hurting anyone’s feelings or bypassing friends or family members who might expect to be guardians but aren’t the best choice. Most importantly, a guardian should be willing and able (emotionally and financially) to take care of your children if the need arises, so an essential step is to discuss the responsibilities with the potential guardian beforehand.

3) Create a Living Will and Last Will and Testament. A living will tells your health-care providers and your loved ones how you would like to be cared for if you should become terminally ill and unable to express your wishes yourself. It is called a “medical directive” in some states. This document details your views toward life-support equipment. Not to be confused with a living will, a last will and testament details how you’d like your assets and possessions distributed after your death.

4) Draft Powers of Attorney. A basic estate plan should also address what would happen to your affairs if you are still living but incapacitated. A power of attorney is a document that specifies who will handle your affairs if you are unable to do so. You’ll need to draft two separate documents: one that names your power of attorney for health-care decisions and another for financial matters (often called a durable power of attorney). The person you entrust with your power of attorney for health care will, ideally, live in close geographic proximity to you. The person you name on your durable power of attorney form should be detail-oriented and comfortable with financial matters.

5) Name an Executor. Your executor will gather all of your assets after you’re gone and make sure they are distributed in accordance with your will. Ideally, your executor will be someone who’s comfortable with numbers and good with details, and will also be able to find the time to work on your estate. It’s common to name family members as executors, but in more complicated situations it might be preferable to use a professional, such as a bank trust officer, to serve as your executor. It’s a good idea to tell your executor that you’ve named him or her, and also provide details on how to obtain access to important documents, such as your will and a master directory detailing all of your accounts.

This information is for informational purposes only and should not be considered as legal or financial planning advice. Please consult a legal and/or financial professional for advice specific to your individual circumstances.

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit: 

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Simple Steps for Late Savers http://www.pwm-nj.com/knowledge/investment/late-savers?utm_source=rss&utm_medium=rss&utm_campaign=late-savers http://www.pwm-nj.com/knowledge/investment/late-savers#comments Wed, 12 Mar 2014 13:00:24 +0000 http://www.pwm-nj.com/?p=9541 more]]> image of a person walking -PublicDomainPictures

The Late Savers

The sooner you start putting aside money for retirement, the more you might have once that highly anticipated day arrives. Saving for college tuition, purchasing a new home, unforeseen medical expenses, or life’s other necessities, surprises, or even enjoyments can cause investors to postpone saving. Starting the retirement planning process late in one’s life can be daunting, but it is by no means impossible.

Crunch the Numbers: The first step to getting back on track is to put together a budget—this will force you to focus on your financial situation and can serve as a road map to success. Once you have outlined all of your expenses, simply subtract the total from your net income. The result will give you a clear indication of how much you can potentially save, and also help you identify areas in which you may be spending too much.

Cut Any Unnecessary Expenses: There are essential expenses that cannot be eliminated: food, electricity, etc. However, most people can identify some areas, like entertainment, that are not vital to one’s existence and can be cut back on. The more areas that you can trim will lead to more money that can be earmarked for retirement.

Take Advantage of Catch-up Contributions: Catch-up contribution limits allow investors age 50 and above to increase their contribution. For example, they can make an extra contribution of $5,500 to their 401(k) in 2014, equating to a maximum contribution of $23,000. IRA catch-ups are $1,000 in 2014, leading to a maximum contribution of $6,500.

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit: 

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Five Strategies to Maximize Your IRA http://www.pwm-nj.com/knowledge/investment/maximize-your-ira?utm_source=rss&utm_medium=rss&utm_campaign=maximize-your-ira http://www.pwm-nj.com/knowledge/investment/maximize-your-ira#comments Tue, 11 Mar 2014 13:00:52 +0000 http://www.pwm-nj.com/?p=9549 more]]> image of train tracks -nuzree

Make the Most of Your IRA

More and more companies have eliminated traditional pension plans, and individual retirement accounts are becoming a cornerstone of many workers’ retirement plans. So it only makes sense to take some time to make sure you are taking maximum advantage of these plans. Follow these strategies and tips to make the most of your IRAs.

Strategy 1: Start early

Lots of young people (and sometimes their parents) don’t realize that they can contribute to an IRA. It is highly advisable to get IRA contributions working as soon as possible. Sooner is better than later because there will be more time for that money to compound over time.

Strategy 2: Plan which investments to hold in your IRA

A number of factors will affect your “asset location” decisions—which assets to hold in your taxable accounts versus tax-sheltered ones like IRAs. Income-generating assets, such as many bonds, may be better held inside your IRA. Meanwhile, stocks typically generate much less income, and that dividend income is taxed at a much lower rate—generally 15%. (Long-term capital gains from stocks enjoy the same rate.) This rule of thumb won’t always hold true; if you are young and have a long time until retirement, you’ll want growth investments (such as stocks) in your IRA.

Strategy 3: Convert part or all of your traditional IRA to a Roth IRA

The Roth IRA has one huge advantage over the traditional IRA: You never have to take required minimum distributions (RMDs) at any age. And when you choose to take distributions, they are generally tax-free. That’s because the Roth IRA requires you to pay taxes up front, either when you contribute the money or when you convert from your traditional IRA to a Roth IRA. And the earnings in that Roth IRA continue to grow tax-free for your beneficiaries after your death. Investors of all income levels are able to convert their traditional IRA assets to Roth assets. It is important to note that those who do elect to make the conversion will have to pay taxes.

Strategy 4: Stretch out your IRA by choosing the right beneficiary option

One of the biggest benefits of IRAs (and other tax-deferred accounts) is the ability to defer paying taxes until a later date. That allows the full value of your account to compound over time. Many investors choose to keep the tax-deferral advantage going as long as possible. This process is known as “stretching out” the value of your IRA. The longer you can delay paying taxes, the greater the possibility that your IRA will grow to an even higher balance.

As part of your overall estate planning, you’ll need to think about whom you want to name as your beneficiary. Naming a spouse as beneficiary to your IRA allows him or her to roll over your IRA after your death into his or her own IRA and name a new beneficiary. If you can’t name a spouse as your IRA beneficiary, name a child or grandchild. If you have multiple beneficiaries (several children), consider splitting your IRA into separate accounts, each with one beneficiary.

Strategy 5: Use your RMDs to rebalance

If you have a traditional IRA, you’ll need to take annual distributions once you are 70 1/2 years of age. Use those distributions as part of your rebalancing process. Once retired, you should have several years’ worth of expenses in cash equivalents. Withdraw your living expenses from those reserves. Occasionally you’ll need to replenish those accounts. Use your IRA distributions as part of that process.

Be sure to consult with a financial advisor or tax professional for the latest rules and regulations. Past performance is no guarantee of future results. Stocks are not guaranteed and have been more volatile than bonds.

 

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit: 

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Fast And Easy Way You Can Supplement A Will http://www.pwm-nj.com/knowledge/investment/supplement-a-will?utm_source=rss&utm_medium=rss&utm_campaign=supplement-a-will http://www.pwm-nj.com/knowledge/investment/supplement-a-will#comments Tue, 04 Mar 2014 20:03:14 +0000 http://www.pwm-nj.com/?p=9521 more]]> image of candle - credit: f_shields

Supplementing a Will

Do you want to provide guidance above and beyond the terms of your will? You can use “letters of instructions” to fill the gaps. Although such documents aren’t legally binding, they still can be helpful. Here are several issues you might address in this way:

  • A letter could detail an inventory of your assets, including checking and savings accounts; safe deposit boxes; retirement plans; Social Security and VA benefits; stocks, bonds, and other investments; real estate holdings; and life insurance and other insurance policies.
  • It also could specify where important papers are located—for example, disclosing where your income tax returns and credit card information may be found. This can ease matters for your executor.
  • It also might address other personal matters, including funeral, burial, or cremation arrangements; addresses and telephone numbers of people and organizations to be notified when you die; and other specific instructions (for example, providing holiday gifts to caretakers).
  • Finally, you could use a letter of instruction to indicate personal preferences, such as your wishes regarding a child’s education. You also might explain the bequest each heir will receive and the reason for the choice.

Letters of instructions are meant to supplement, not replace, a valid will. Nevertheless, they can offer valuable guidance at a time of need.

Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section.This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved. Photo Credit:  f_shields 

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Crummey Gifts: Spring Into Action http://www.pwm-nj.com/knowledge/tax/crummey-gifts?utm_source=rss&utm_medium=rss&utm_campaign=crummey-gifts http://www.pwm-nj.com/knowledge/tax/crummey-gifts#comments Mon, 03 Mar 2014 14:00:19 +0000 http://www.pwm-nj.com/?p=9532 more]]> image of a gift - Nemo

Crummey Gifts

Traditionally, the end of the year is the time when wealthy individuals give gifts to other family members, especially to children who are likely to be in lower tax brackets. Not only does such gift-giving coincide with the holiday season, it also lets you beat the deadline for using the annual federal gift tax exclusion. You now can give as many recipients as you like gifts of cash and property totaling up to $14,000 each without paying federal gift tax. If you give as a couple with your spouse, that amount is doubled to $28,000 per recipient. And if you exceed the maximum annual gift tax exclusion? You’re still likely not to owe any tax on the gift, thanks to a lifetime exclusion that is $5.34 million in 2014. Tapping the lifetime gift tax exemption reduces the amount available to offset possible future federal estate taxes, but the total amount is large enough to leave most people plenty of room to maneuver. Yet there’s no reason to wait until the end of the year to give away assets. Indeed, earlier gifts are usually better. The sooner assets find their way to the accounts of lower-taxed family members, the less tax erosion will undercut potential investment growth of those assets. If, instead, you postpone gifts until December, more of the income will be taxed to you in your higher bracket. An early gift also might help you avoid or minimize the impact of the 3.8% Medicare surtax on net investment income as well as reducing income tax liability on future sales of the property. Gift-giving can take many forms, but one approach to consider is using a “Crummey trust” (named for the first person to use this technique in a court-approved case). With a Crummey trust, you transfer assets to a trust and name the lower-taxed family member as beneficiary. Typically, the trust provides a small “window” of, say, 30 days, during which the beneficiary has the right to withdraw the funds. If the window isn’t opened, the assets become subject to the terms of the trust. Usually, understanding your intention, the beneficiary won’t attempt to use the funds during the 30-day period. But creating this withdrawal power lets the transfer qualify for the annual gift tax exclusion. In most cases, a Crummey trust will be able to preserve funds for young family members until they reach the age of majority. Or you could set up the trust to last even longer and provide payments to beneficiaries at predetermined intervals. That could help alleviate concerns about spendthrift children and remove the assets from the clutches of creditors.

Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section.This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved. Photo Credit: 

 

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When Two Out Of Three Ain’t Bad http://www.pwm-nj.com/knowledge/tax/retirement-accounts?utm_source=rss&utm_medium=rss&utm_campaign=retirement-accounts http://www.pwm-nj.com/knowledge/tax/retirement-accounts#comments Wed, 26 Feb 2014 14:00:41 +0000 http://www.pwm-nj.com/?p=9500 more]]> image of couple on the beach -tomwieden

Elements of a Retirement Account

From a tax perspective, a dream retirement account probably would encompass three elements:

  • Contributions to the account would be tax-deductible.
  • Accumulation of earnings within the account would be tax-deferred.
  • Distributions from the account would be tax-free.

Of course, there’s no such animal, but various types of accounts can deliver two of those three elements. And two out of three ain’t bad.

For instance, if you establish a traditional IRA, you may be able to deduct contributions to the account, especially early in your career when your income is lower. However, deductions for contributions are phased out if you (or your spouse) participate in a retirement plan at work and your income exceeds a specified level. Nevertheless, any earnings inside the IRA will continue to grow without erosion by taxes until the money is withdrawn.

When you take distributions from a traditional IRA, the portion of the withdrawal representing deductible contributions and earnings will be taxed at ordinary income rates. You also might owe a 10% tax penalty on the taxable portion of distributions you take before age 59½. Finally, after you hit age 70½, you’ll have to take “required minimum distributions” (RMDs) each year.

Generally, your contributions to a 401(k) or another kind of “qualified” workplace retirement plan are exempt from taxes up to a specified annual maximum, and earnings inside your account continue to build up tax-deferred, just as they do with a traditional IRA. But here, too, your distributions from the plan will be taxable at ordinary income rates on a pro-rata basis—that is, you’ll be taxed on the portion of each withdrawal that represents pre-tax contributions and the earnings they generate. But if you change jobs or retire, you could make a tax-free rollover into another qualified plan or an IRA. As with traditional IRAs, distributions from workplace plans prior to age 59½ are normally subject to a 10% tax penalty, and the rules for RMDs also apply to these plans unless you’re still working full-time.

With a Roth IRA, contributions are never deductible, but any earnings in the account will grow tax-deferred. Even better, for a Roth you’ve had for at least five years, distributions after age 59½ are tax-free. If you make a withdrawal within the first five years, account earnings will be taxed at ordinary income rates but you’ll be allowed a tax-free return of contributions.

Unlike traditional IRAs and qualified plans, a Roth IRA doesn’t force you to take RMDs during your lifetime. That means you can pass along all of the account’s assets to your heirs.

Because there’s no dream plan that offers all three desirable attributes, you could choose to combine different kinds of accounts to get a blend of tax benefits.

Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section.This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved. Photo Credit: 

 

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