Category Archives: FINANCE

FINANCE HIGHDANCE

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DEMENTIA AND FINANCIAL PLANNING

I know this will seem like a cross subject, but it concerns money and Alzheimer’s.  I decided it needed to be in Finance Highdance; the Alzheimer’s is a whole other matter.

Most of us have either had a parent or grandparent with dementia problems, and it creates a humongous strain on the whole family.  From money, to financial responsibilities, to care, to housekeeping, and on and on.  If you happen to be one of the children, or grandchildren who still live nearby, the burdens typically fall on you.  When it comes to financial issues there may come a time when you will need to take over.   How do you do that?

You should hire legal assistance to go forward due to the fact that financial institutions need authorization for such actions that you may need to do.  Your attorney can help you accomplish the power of attorney paperwork which, in effect, can allow you financial authority over specifics.  A durable power of attorney allows you immediate ability to process financial matters, or a springing power of attorney only takes effect when a medical diagnosis confirms the individual’s mental incompetence.  Whichever is decided you will need to send copies to financial institutions.  It is recommended that it may be best to get a durable power of attorney before your parent or grandparent is unable to make financial decisions, as some financial institutions require the original owner to sign a form to allow another person access to investments.  You can also be appointed as guardian or conservator.  Your attorney will guide you in these differences and decision-making.

Hopefully, you can provide medical history or prescriptions, as needed.  Also the checking, savings and investment accounts, insurances, PASSPORT and/or Driver’s License, Social Security Numbers and any passwords used.  You will need to know the beneficiaries for insurances or any other documents which allow those.  Your attorney will be able to help in some of these instances, including income, wills, deeds and trust documents.

You may decide that you do not wish to become the responsible party.  You can very carefully review whether to select an attorney or a wealth management organization to  assist in these details.

Rest assured you are not alone in this situation these days.  There are many support groups available for families struggling through the maze.  Check with your attorney, your local health department and/or senior center; help is waiting.

 

 

 

 

 

FINANCE HIGHDANCE

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ROTH; IS IT FOR ME?

When you contribute to a Roth account you will probably pay more taxes today so that in retirement your taxes will be lower.  If you already have a retirement account and are considering converting to a Roth, the same will apply to the converted amount.  A Roth is beneficial if you expect to be in a higher tax bracket at retirement, as high earnings time is when you face the biggest tax bills.  So, will you indeed be in a higher tax break then?  No one has that crystal ball since political policies can change, your income may have been affected by a company downsizing, etc.  Motley Fool’s article Rule Your Retirement by Robert Brokamp, CFP has a few guidelines:

If you are single and have $37,450 or less in taxable (not gross) income, or are married and have $74,900 or less in taxable income, you are in the 15% tax bracket in 2015.  The Roth is probably your better bet.

Since younger workers reach their greatest earning years in their late 40’s or early 50’s it makes sense for them.

The closer you are to retirement will require you to use an online tax calculator to estimate your current and retirement tax liabilities in order to feel comfortable with projections.

Most people drop into a lower tax bracket when they retire.

Since we seem to have large government deficits and underfunded entitlements it is expected tax rates will go up.  That would fall to the younger, higher-income individuals or families.

TAX BENEFIT

The more income you receive in retirement, the more your Social Security benefit will be taxed.  Withdrawals from traditional accounts are included in your income, which can lead to higher Social Security taxation.  Withdrawals from Roths are not.  So, not only are the withdrawals tax-free, but they might also shield more of your Social Security from taxation.  But remember that contributing to a traditional retirement plan or deductible traditional IRA reduces your adjusted gross income (AGI) which affects other aspects of your tax bill.  Use an online tax calculator or speak with your accountant to understand your best move.

AGE 70 1/2

You must begin taking required minimum distributions (RMDs) from traditional accounts at age 70 1/2, or wait a year and take two distributions.  (Don’t ask, I don’t understand)  I have an account that will not only remind me, but with my approval, forward my correct percentage check, so that I never mess that part up.  Beyond this age of 70 1/2 you can no longer contribute to a traditional IRA, but you do not have to worry about RMDs with Roth IRAs, and you can continue to contribute as long as you have income. Roth 401(K)s and 403(b)s are subject to RMDs when you no longer work for the company, but all you have to do is transfer those assets to a Roth IRA to make them RMD-free.  Woo Hoo!  If you have lots of moolah, keeping money in tax-advantaged accounts as long as possible is obviously beneficial in order for you to leave a nice income-tax-free inheritance to your heirs.

LIMITS

There are tables you can access which tell the limits of how much you can contribute to Roth accounts, and higher-income folks may not be able to contribute to a Roth IRA at all.  However, anyone of any age can do a Roth conversion.  There used to be an income restriction, but that is no longer.  Through work the only money you can’t convert is any non-vested employer matches.  You will still owe taxes on the amount converted.  If you have some sort of financial turn-around after your conversion there is a process called recharacterization you might utilize to change your mind; you have until October 15 of the following year to do that.  The conversion cannot be pieced, or less than the conversion, in recharacterization.  If you are concerned, more than one account could be utilized.

If you are unable to contribute to a Roth IRA because of income limits, you still might have an option.  You can contribute to a non-deductible traditional IRA (at less than 70 1/2, though) as long as he or she has earned income, and immediately convert to a Roth.  If you don’t have any pre-tax money in any other traditional IRA accounts, including SEPs, rollovers, SIMPLEs, you can immediately convert that traditional IRA to a Roth IRA,  (“you”, meaning you can ignore what your spouse has.)  Here is the real bonus:  Because you couldn’t deduct the contribution, and because the account had no opportunity to grow, you won’t owe any taxes on the conversion.  This is also known as the “Backdoor Roth”.

BOTTOM LINE

If you are confused, so are experts, at times.  A good bit of caution is warranted, especially when it comes to pre-59 1/2 withdrawals and account rollovers.  So triple-check all and work with your CPA for information and confirmation.  Do not give up, though.  Putting in the time to learn all the details, getting help, and making the moves that are right for you can result in thousands of dollars of after-tax monies.

FINANCE-HIGHDANCE

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RETIREMENT

I should have printed that in red.  It is on a lot of minds right now.  Just think of the Boomers retiring left and right, day and night!  I found a few pearls of wisdom, one entitled “How You Could Retire Comfortably on Half of Your Income” by Matthew Frankel, and felt compelled to share:

Oh wait, it is advising some smart planning in my pre-retirement years.  Who has that much time?  Something about the 80% rule, or the assumption that your postretirement expenses will be close to your pre-retirement ones.  You will still be paying for the same utilities, etc. as before, but the only thing you “save” is the amount you had been putting aside for retirement.  Granted, good point.  A pre-retirement suggestion, next, was to see if you can “up” your payment on one of your debts prior to retirement, so you get to keep, or spend, that amount along with what you were saving to spend.  Make sense so far?

Basically, try to get rid of a major debt (like car or home) prior to the milestone moment.  If you are fairly young enough to get this plan going, the article makes a few suggestions to get you started:

Use a biweekly payment plan to pay off your mortgage…pays off sooner and saves interest.

Take any tax refund each year and put it on the mortgage

Trade down to a less expensive car (what?) that you can pay for in full.

Seriously, this plan is not a bad one, (check out Fool.com) and there are many ways to save for retirement as in CD’s instead of bank savings accounts, market trading, financial investor (be careful; as Suzi Ormon directs…stay away from Annuities!),and many types of investments.  It reminds me of the old saying..”Gee, if I had known I would live this long I would have taken better care of myself!”  I always thought it meant health:)

You cannot go forward without a plan.  As I mentioned before (and I know you did it) you have your personal financial statement, your credit score, and now you can crunch some numbers.  You have to sit down and figure out exactly what your expenses are, then you need to know exactly what your annual social security will be (remember those letters we receive once in awhile that you put somewhere?), and pensions or any other passive income you have.  If you are still working and you are, let’s say, over 40, you will need to try to put away $18,000 a year (Government limit in 401K for 2015) and any other monies in any form you choose, savings accounts, etc.   Now, and beside the point, the Social Security check will vary, depending on what part B Supplement plan you buy that is deducted from your check, or you can have an increase, but the important thing right now is to GET A PLAN.  We will discuss Medicare and Supplemental Insurance in another segment when you have figured out where you really are and how you got, or will get there.

Stay wise, my friends!

FINANCE-HIGH DANCE

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First let me say that I regret having let you down regarding tax time tips.  That being said, I hope you got your taxes all sent with great relief for another year, no thanks to me.  Although no expert, I did take note from many that the tax rule changes were brutal for 2014.  Hang in there throughout the year, and if I discover tips to help you I will share.

The first item on my list to share today could be used as a Health Blurbs segment or Finance-High Dance; it is about…..

McDonalds

Did you hear that McDonalds is cutting some of their sandwiches?  Seven, in fact.  What with sales declining the last six quarters, Their new chief executive, Steve Easterbrook, not only needs the sales figures to improve, but is being pushed for healthier food.  Menu researcher, Datassential from Los Angeles, says that McDonalds will still have about 40 more items than it did in 2007.  Outcome?  The Deluxe Quarter Pounder was replaced by a similar hamburger with different toppings, Chicken Selects was brought back this year, a new sirloin burger is planned, more tests are being done but, wait for it…….they are testing all-day breakfast at about 94 restaurants in the San Diego area…yay, yay and more yay!!!

APPLE

Old news, but the Apple watch arrived in other stores (not its own) such as in Dover Street Market in Tokyo and London, Maxfield in Los Angeles, Colette in Paris, the Corner in Berlin by the 24th of April, and 10 Corso Como in Milan by May.   Of course, you could have ordered on-line.  Folks were beginning to receive them last Friday.   But if you ordered, just hang, because they say they are behind and, in fact, have back ordered the gold Edition (starting at $10,000).  They do appreciate your patience, though.

GREECE

As you know, Greece is in a little bit of debt, o.k. a lot.  As you might expect, the finger-pointing has gotten tense.  Representing 2% of the eurozone economy, some think Greece’s default would not pose a broad threat, yet bankers and regulators have not forgotten Lehman Brothers in 2008.  Over the last year, investors have been trying to figure what would happen if Greece does not pay.  There does not seem to be any answers so far.  If the debt talks go on and on it is likely that Greece will miss a debt payment (owes about $830 million to the International Monetary Fund) or yield to capital controls to prevent a bank run.  IOU’s have even been considered.  The Finance Minister, Mr. Varoufakis has clashed on several occasions with the Dutch finance minister, Mr. Dijsselbloem, who represents European creditors.  This past Monday, the Greek stock market rallied and bond yields dipped with the anticipation that the finance minister would assume a reduced role in future talks with Greece’s creditors.  Mr. Varoufakis says he is not going anywhere. Senior members of the U.S. worry that Europe may be underplaying the consequences of a Greek default.  Hmmmmmm.

GODADDY

Have a website with GoDaddy?  It has grown up to become a publicly traded company as of this month.  Founded in 1997 by Bob Parsons, the company was known through its risque ads.  However, being purchased by an investment firm in 2011 is  resulting in a remake of its image as well as its business platform. The new version is appealing to investors.  The initial public offering was $20/share, raising $440 million.  The market value is just more than $3 billion.  GoDaddy will trade under the ticker symbol GDDY on the New York Stock Exchange.  Isn’t Mommy’s Day around the corner?  “GMMY”…looks good to me!  Let me know if someone starts it!

FINANCE HIGH-DANCE

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HELLO ALL,

IT HAS BEEN SOME TIME SINCE WE LAST DISCUSSED money.  No one really wants to talk about it, anyway.

Sometimes it is a necessary evil, and sometimes it is a delightful experience.   At this time of year it is a necessary evil, plus in our last FINANCE HIGH-DANCE post we talked about doing ourselves a personal financial statement.  Hopefully you have completed one in preparation for your future financial planning.  If you have put it off like a New Year’s Resolution, let me help you get it started by telling you about an ideal template you can use.  It is free at pdffiller.com, and you can download it, fax it, e-mail it or fill online.  Tell yourself you cannot give this up for Lent, and promise yourself you will have it done before April 16, just so you have a goal.

Once you actually begin to put in your numbers you will see it is not as bad as you thought.  Remember, just put in what it asks.  You will see the logic when you finish; and you will actually know your financial worth!  If you are in doubt about any entry you can find out your answers through any number of avenues, but if all else fails, send me your questions.  I am not an expert by any means, but I have years of experience and background to support my recommendations.

Now, once you get that done, your next challenge will be to mark your calendar for updates.  It is your call as to when, because you may or may not need to run to the nearest bank for a home, car, or personal loan right away.  If you have plans to do something soon I would go ahead and update monthly, if not, quarterly will suffice.

Next, I would recommend that you go on a free site to check your credit score.  Ideally, everyone would like over 800, but I discovered that no matter how well you keep your payments up-to-date your score is affected by how many credit cards you have.  My score is less than hubby’s; I pay all the bills, credit cards paid off end of each billing month, etc., but I am the one who goes for that extra credit card when I am about to save 20 % on a purchase (you gals know exactly what I mean).  So, do as I say and not as I do, and do not collect credit cards.  Your score will be better.  And ALWAYS pay cards off monthly…that interest rate will devour you and make that debt hole deeper and deeper.  Just have a plan to pay it off, too.  Anyway, you want to know your score if and when you march in to the bank for that loan.  Have you seen the commercial where the couple are at the bank?  The lady knew her credit score, and was less than ladylike in her strong arm approach (flinging feet up on the banker’s desk) with her banker, but the point is well-made that we can do this.  I recommend you be polite and knowledgeable while keeping your feet on the floor:)

OK; that is enough rambling for today.  Work on your personal financial statement, check your credit score, and I will be back to you before April 16 with any suggestions I have.  Remember, we have to get to a point where we want to grow our monies for lots of reasons…children’s college, family vacations and the delightful, yet dreaded retirement…to mention a few.