IRA and retirement account contribution deadlines: April 15th
The Individual Retirement Account, or IRA is probably the most popular investment account for individual investors. Started in 1974, the IRA allowed workers without a traditional company retirement plan, a much needed way to save tax-deferred for their retirement.
The key to building substantial wealth in an IRA account is to contribute to it every year, and let your money grow with the stock market. Here's a table to show you the almost magical effect of compound growth with your IRA.
10 years @ 10% growth, contributing $3,000 per year: ending balance, $52,593
15 years @ 10% growth, contributing $3,000 per year: ending balance, $104,850
20 years @ 10% growth, contributing $3,000 per year: ending balance, $189,007
25 years @ 10% growth, contributing $3,000 per year: ending balance, $324,545
As you see, contributing $3,000 per year, or $58 per week, with the added growth of those deposits, can really add up. Skipping contributions will hinder your performance. Taking money out before age 59 1/2 will also incur tax penalties, and you will pay tax now on the withdrawal. Initially set at $1,500 per year as a maximum contribution, it is $4,000 per person today, and $5,000 if you are over age 50. That can increase those balances above substantially.
You may question my using the 10% figure. That is the average gain in the stock market over 70+ years as measured by the S&P 500 Index, which includes dividends. Take a look at history.
1940's - stock market gained 11% per year
1950's - stock market gained 17% per year
1960's - stock market gained 8% per year
1970's - stock market gained 8% per year
1980's- stock market gained 15% per year
1990's- stock market gained 15% per year
When is the best time to contribute to your IRA account? Anytime. With only a few weeks left to contribute for 2007, you had better get moving. If you are expecting an income tax refund, it would probably pay to even borrow the IRA deposit money now, make your deposit and then pay back the loan with your tax refund or recently approved tax rebate.
Give me a call should you require further advice on this topic, or to open your IRA account.
~Barry Unterbrink
(954) 719-1151
Wednesday, March 28, 2007
Using IRAs to Retire
Barry Unterbrink is a fee-based Chartered Retirement Planning Counselor and wealth manager since 1982. As a second generation manager after his father Larry (1934-2021), they managed institutional pension funds totaling $100 million.Both are former Investment Advisory Presidents and financial newsletter publishers.
Tuesday, February 27, 2007
Today's Market - Don't Lose Your Head
Feb. 27, 2007
Tuesday's stock market action was fairly chaotic and painful on the downside as stock prices across the board fell significantly. The Dow Industrials, Nasdaq Composite and S&P 500 Indices fell 3.3% to 3.9%. Hopefully, you had time to relax after work and have a nice dinner before turning on the television set and checking the financial news on the grim details.
Speaking of financial news, the popular networks, CNN, CNBC, Fox, etc. do not do much to calm anyone. Their job, in my opinion, is to squawk louder and louder in your ear, creating doubts in your mind, and often cause investors to make the wrong decisions. Decisions that your emotions cause you to do over acting rationally. They harp, "Biggest down day since March 24th, 2003", "Worst day for the S&P 500 Index since Sept. 17, 2001" (the first day the markets reopened after 9-11). Their job is to keep your eyeballs and ear drums tuned in. The show titles are silly; Mad Money and Fast Money. The investing game is characterized like going to Las Vegas with a pair of dice where everyone can win every day.
Putting the stock market in perspective, the action today basically erased about 7 weeks of gains, since the beginning of 2007. Whoop-de-doo! Are you planning to use your retirement plan, 401-k or other investment accounts tomorrow? Most of us are not. If you own stocks directly or through mutual funds, as 92 million American's do, you should understand that investing is a life long endeavor - a multi year marathon, not a morning 100 yard dash.
Here are some common sense tidbits of advice I can dish out from my 25 years of managing money.
1> Have a game plan in place - what level of loss can you live with? 10%, 15%, 25%.
2> Review your performance for last year. Get your year-end 2006 gain/loss statement and look it over. Were your decisions good, bad, ugly? What can you learn and improve upon from your investing.
3> Avoid making big bets or switching in and out of stocks or funds frequently. Scale in or out gradually over the weeks and your performance will be more even-keeled.
4> Rarely be fully invested in stocks. Have some cash or bond funds around to take advantage
of opportunities to buy or add to your favorite stocks or funds when they go on-sale.
5> Think long term, 5-10-15 or more years. It's time that will make you richer, not timing.
6> If you still toss and turn at night and can't handle investing yourself, hire a professional to manage your money for you.
If you would like some safe money alternatives es to investing in the stock market, be the first to call or e-mail me and I'll send you an informative book, Safe Money Places.
~Barry Unterbrink
(954) 719-1840 : unterbrink@usa.net
Tuesday's stock market action was fairly chaotic and painful on the downside as stock prices across the board fell significantly. The Dow Industrials, Nasdaq Composite and S&P 500 Indices fell 3.3% to 3.9%. Hopefully, you had time to relax after work and have a nice dinner before turning on the television set and checking the financial news on the grim details.
Speaking of financial news, the popular networks, CNN, CNBC, Fox, etc. do not do much to calm anyone. Their job, in my opinion, is to squawk louder and louder in your ear, creating doubts in your mind, and often cause investors to make the wrong decisions. Decisions that your emotions cause you to do over acting rationally. They harp, "Biggest down day since March 24th, 2003", "Worst day for the S&P 500 Index since Sept. 17, 2001" (the first day the markets reopened after 9-11). Their job is to keep your eyeballs and ear drums tuned in. The show titles are silly; Mad Money and Fast Money. The investing game is characterized like going to Las Vegas with a pair of dice where everyone can win every day.
Putting the stock market in perspective, the action today basically erased about 7 weeks of gains, since the beginning of 2007. Whoop-de-doo! Are you planning to use your retirement plan, 401-k or other investment accounts tomorrow? Most of us are not. If you own stocks directly or through mutual funds, as 92 million American's do, you should understand that investing is a life long endeavor - a multi year marathon, not a morning 100 yard dash.
Here are some common sense tidbits of advice I can dish out from my 25 years of managing money.
1> Have a game plan in place - what level of loss can you live with? 10%, 15%, 25%.
2> Review your performance for last year. Get your year-end 2006 gain/loss statement and look it over. Were your decisions good, bad, ugly? What can you learn and improve upon from your investing.
3> Avoid making big bets or switching in and out of stocks or funds frequently. Scale in or out gradually over the weeks and your performance will be more even-keeled.
4> Rarely be fully invested in stocks. Have some cash or bond funds around to take advantage
of opportunities to buy or add to your favorite stocks or funds when they go on-sale.
5> Think long term, 5-10-15 or more years. It's time that will make you richer, not timing.
6> If you still toss and turn at night and can't handle investing yourself, hire a professional to manage your money for you.
If you would like some safe money alternatives es to investing in the stock market, be the first to call or e-mail me and I'll send you an informative book, Safe Money Places.
~Barry Unterbrink
(954) 719-1840 : unterbrink@usa.net
Barry Unterbrink is a fee-based Chartered Retirement Planning Counselor and wealth manager since 1982. As a second generation manager after his father Larry (1934-2021), they managed institutional pension funds totaling $100 million.Both are former Investment Advisory Presidents and financial newsletter publishers.
Wednesday, February 21, 2007
Estate Planning 101
Why is Estate Planning important?
Estate planning gives you peace of mind by knowing that you have provided security and privacy for your family and loved ones. There are many other benefits of creating an estate plan including: 1) avoidance of costly probate estate proceedings at death, 2) consolidation of all your assets in one plan, 3) faster distribution of assets, 4) reduction or elimination of estate taxes, 5) ability to specify that assets remain in trust until you want them distributed, 6) and avoidance of guardianship. In addition, trusts are more difficult than a will to contest in court.
What happens if you do not have an Estate Plan in place?
If you do not have an estate plan in place when you die, your estate, including debts, will enter a court probate proceeding, which is a legal process that oversees payments of your debts and distributes your assets according to your will. If you have not provided for a valid will, then the court will distribute your assets according to state law.
How do you avoid Probate?
Not only is probate court costly and time consuming, but it also does not afford your family any privacy or control of the distribution of your assets. To avoid probate proceedings, you should set up a revocable living trust. This legal document allows you to transfer ownership of your assets from your name into a trust, which you control. The trust also prevents the court from controlling your assets in case you become incapacitated; for example, due to incompetence or illness or if you die. For probate purposes there are no assets that would be subject to the probate court process. With a revocable trust, you personally do not own anything since all your assets are in the trust.
What is the Tax benefit of a Living Trust?
Federal estate taxes are expensive (top tax rate at 45% in 2007 and 2008) and they must be paid in cash, usually within nine months after you die. Your estate will have to pay estate taxes if its net value (adding all assets and then subtracting all debts) when you die is more than the exemption amount set by Congress at that time. The current exemption amount is $2 million. Assets include your home, business interests, bank accounts, investments, personal property, IRA’s, retirement plans, and any death benefits from your life insurance. It would be helpful to prepare a listing of all your assets and their estimated values so that your advisor can properly assist you with your estate planning.
Estate Planning can help you reduce or eliminate your estate taxes in three simple ways. 1) Remove assets from your estate before you die via gift; 2) Buy life insurance to replace assets given to charity and/or pay estate taxes at a reduced cost; and 3) if you are married, your revocable trusts can utilize both spouses’ estate tax exemptions and possibly pay no estate taxes.
Who are successor trustees and what do they do? Successor trustees can be your child, CPA, corporate fiduciary, attorney, etc. It is critical that successor trustees be appointed because if you become incapacitated, your successor trustee can look after your care and manage your financial affairs using your assets, and if you die, can dispose of your assets pursuant to the provisions in your trust.
What is a Designation of Health Care Surrogate?
This document allows you to designate someone you trust to act on your behalf to make health care decisions in the event you are not capable to do so. These health care decisions may include the consent, refusal or withdrawal of your health care regarding pain management, the removal of respiratory support, artificial nutrition and/or artificial hydration.
What is a Durable Power of Attorney?
In the event of your incapacity to act, this document allows your designated agent to handle your financial affairs as necessary and transfer assets to your revocable trust.
How much can I save by preparing an Estate Plan instead of paying an attorney, CPA, or personal representative to administer an estate in probate?
Preparing an estate plan can avoid many costs typically associated with probate, including attorney’s fees, personal representative fees, and other court costs. Probate costs can range from six to eight percent of your assets versus an average of one to two percent in non-probate estates.
Who should have an Estate Plan?
Having an estate plan should not depend on your age, marital status, or wealth. If you own any titled assets and want your loved ones to avoid court interference at the time of your death or incapacity, then you should consider preparing an estate plan. Further, you may want to encourage other family members to have one, so that you will not have to deal with the courts if they should become incapacitated or die.
Copyright 2007, Christopher D. Vasallo, J.D./LLM Taxation
Estate planning gives you peace of mind by knowing that you have provided security and privacy for your family and loved ones. There are many other benefits of creating an estate plan including: 1) avoidance of costly probate estate proceedings at death, 2) consolidation of all your assets in one plan, 3) faster distribution of assets, 4) reduction or elimination of estate taxes, 5) ability to specify that assets remain in trust until you want them distributed, 6) and avoidance of guardianship. In addition, trusts are more difficult than a will to contest in court.
What happens if you do not have an Estate Plan in place?
If you do not have an estate plan in place when you die, your estate, including debts, will enter a court probate proceeding, which is a legal process that oversees payments of your debts and distributes your assets according to your will. If you have not provided for a valid will, then the court will distribute your assets according to state law.
How do you avoid Probate?
Not only is probate court costly and time consuming, but it also does not afford your family any privacy or control of the distribution of your assets. To avoid probate proceedings, you should set up a revocable living trust. This legal document allows you to transfer ownership of your assets from your name into a trust, which you control. The trust also prevents the court from controlling your assets in case you become incapacitated; for example, due to incompetence or illness or if you die. For probate purposes there are no assets that would be subject to the probate court process. With a revocable trust, you personally do not own anything since all your assets are in the trust.
What is the Tax benefit of a Living Trust?
Federal estate taxes are expensive (top tax rate at 45% in 2007 and 2008) and they must be paid in cash, usually within nine months after you die. Your estate will have to pay estate taxes if its net value (adding all assets and then subtracting all debts) when you die is more than the exemption amount set by Congress at that time. The current exemption amount is $2 million. Assets include your home, business interests, bank accounts, investments, personal property, IRA’s, retirement plans, and any death benefits from your life insurance. It would be helpful to prepare a listing of all your assets and their estimated values so that your advisor can properly assist you with your estate planning.
Estate Planning can help you reduce or eliminate your estate taxes in three simple ways. 1) Remove assets from your estate before you die via gift; 2) Buy life insurance to replace assets given to charity and/or pay estate taxes at a reduced cost; and 3) if you are married, your revocable trusts can utilize both spouses’ estate tax exemptions and possibly pay no estate taxes.
Who are successor trustees and what do they do? Successor trustees can be your child, CPA, corporate fiduciary, attorney, etc. It is critical that successor trustees be appointed because if you become incapacitated, your successor trustee can look after your care and manage your financial affairs using your assets, and if you die, can dispose of your assets pursuant to the provisions in your trust.
What is a Designation of Health Care Surrogate?
This document allows you to designate someone you trust to act on your behalf to make health care decisions in the event you are not capable to do so. These health care decisions may include the consent, refusal or withdrawal of your health care regarding pain management, the removal of respiratory support, artificial nutrition and/or artificial hydration.
What is a Durable Power of Attorney?
In the event of your incapacity to act, this document allows your designated agent to handle your financial affairs as necessary and transfer assets to your revocable trust.
How much can I save by preparing an Estate Plan instead of paying an attorney, CPA, or personal representative to administer an estate in probate?
Preparing an estate plan can avoid many costs typically associated with probate, including attorney’s fees, personal representative fees, and other court costs. Probate costs can range from six to eight percent of your assets versus an average of one to two percent in non-probate estates.
Who should have an Estate Plan?
Having an estate plan should not depend on your age, marital status, or wealth. If you own any titled assets and want your loved ones to avoid court interference at the time of your death or incapacity, then you should consider preparing an estate plan. Further, you may want to encourage other family members to have one, so that you will not have to deal with the courts if they should become incapacitated or die.
Copyright 2007, Christopher D. Vasallo, J.D./LLM Taxation
Barry Unterbrink is a fee-based Chartered Retirement Planning Counselor and wealth manager since 1982. As a second generation manager after his father Larry (1934-2021), they managed institutional pension funds totaling $100 million.Both are former Investment Advisory Presidents and financial newsletter publishers.
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