Monthly Archives

May 2020

Roth IRA Conversion in the Era of COVID-19: Is it right for you?

By | Advice, Uncategorized

Provided by DJ Lee, CFA

Difficult times may open doors to new possibilities. Businesses are changing their ways of operating, and individuals are exploring new avenues for investment. It may be time for you to consider some opportunities, as well.

What is a Roth Conversion? A Roth conversion refers to the transfer of an Individual Retirement Account (IRA), either Traditional, SIMPLE, or SEP-IRA, into a Roth IRA. With Roth IRAs, you pay tax on the money before it transfers into the account.

One benefit to having your money in the Roth IRA is that, unlike a Traditional IRA, you currently are not obligated to take Required Minimum Distributions (RMDs) after you reach age 72 (RMDs would be required to any non-spousal beneficiaries, however).

Another benefit is that since the money was taxed before going into the Roth IRA, any distributions are tax-free. Keep in mind that tax rules are constantly changing, and there is no guarantee that Roth IRA distributions will remain tax-free.1,2

Why Go Roth in 2020? In the face of the market downturn after the COVID-19 outbreak, you may be in a unique financial situation. For example, suppose you have an IRA account that was worth $1 million before the downturn, but it’s currently worth $800,000.

Perhaps your income has also decreased, potentially putting you in a lower tax bracket. Maybe you own one or more businesses, such as restaurants, that have been closed. You may not yet know if these businesses will be opening again in 2020. Your income could hypothetically be considerably lower this year than last year.

But: this may present an opportunity. Less earned income may mean lower total taxes due on a Roth conversion, especially if the overall account value has dropped.

Keep in mind, this article is for information purposes only and is making an assumption on an IRA account’s value and applying a hypothetical drop in earned income. We recommend you contact us before modifying your retirement investment strategy.

No Turning Back. While this may be a good time for you to consider converting to a Roth IRA, remember that there’s no turning back once you do. The Tax Cuts and Jobs Act of 2017 decreed that Roth conversions could no longer be undone.3

A Roth IRA conversion is a complicated process, and it’s wise to involve a trusted financial professional. Please feel free to reach out to us with any questions you have about your situation.

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DJ Lee is an Investment Adviser Representative of American Wealth Management (“AWM”), an SEC‐registered investment adviser. Any opinions or views expressed by Mr. Lee are solely those of Mr. Lee and do not necessarily reflect the opinions or views of AWM or any of its affiliates, or any other associated persons of AWM. Any such views are subject to change without notice. You should not treat any opinion expressed by Mr. Lee as investment advice or as a recommendation to make an investment in any particular investment strategy or investment product. Mr. Lee’s opinions and commentaries are based upon information he considers credible, but which may not constitute research by AWM. Mr. Lee does not warrant the completeness or accuracy of the information upon which his opinions or commentaries are based.

Neither Mr. Lee nor AWM has any duty or obligation to update the information contained herein. Further, no representations are being made, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.

This article is for informational and educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning investment product types, economic trends and performance is based on or derived from information provided by independent third‐party sources. Neither Mr. Lee nor AWM can guarantee the accuracy of such information and neither Mr. Lee nor AWM have independently verified the accuracy or completeness of such information or the assumptions on which such information is based.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – Investopedia.com, November 26, 2019.
2 – Investopedia.com, January 17, 2020.

3 – Congress.gov, December 22, 2017.

Pullbacks, Corrections, and Bear Markets

By | Uncategorized

What’s the difference? What do these terms mean for you?

The COVID-19 outbreak has put tremendous pressure on stock prices, prompting some investors to blindly and indiscriminately sell positions at a time when the entire market is trending lower. Worried investors believe “this time it’s different.” When the market drops, some investors lose perspective that downtrends – and uptrends – are part of the investing cycle. When stock prices break lower, it’s a good time to review common terms that are used to describe the market’s downward momentum.1,2

Pullbacks. A pullback represents the mildest form of a selloff in the markets. You might hear an investor or trader refer to a dip of 5% to 10% after a peak as a “pullback.”1

Corrections. The next degree in severity is a “correction.” If a market or markets retreats 10% to 20% after a peak, you’re in correction territory. At this point, you’re likely on guard for the next tier.1

Bear Market. In a bear market, the decline is 20% or more since the last peak.1

All this is normal. Pullbacks, corrections, and bear markets are a part of the investing cycle. When stock prices are trending lower, some investors can second-guess their risk tolerance. But periods of market volatility can be the worst time to consider portfolio decisions.

Pullbacks and corrections are relatively common and represent something that any investor may see in their financial life, from time to time – often, several times over the course of a decade. Bear markets are much rarer. What we are experiencing now represents the start of the ninth bear market since 1926. This bear market follows the longest bull market on record.1

How is this bear market going to affect me? That’s a good question, but it’s something that you won’t fully understand in the here and now. The average bear market lasts 146 days for the Standard & Poor’s 500.2

An investment strategy, formed with the help of a trusted financial professional, has market volatility factored in. As you continue your relationship with that professional, they will also be at your side to make any adjustments as needed and help you make any necessary decisions along the way. Their goal is to help you pursue your goals.

Challenging times like these create opportunities for new innovations, discoveries, and growth like a forest after a fire. If you can add money during these times when some are fearful, you will an opportunity for rewards when we come out on the other side.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accountireng or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities.

Citations.

1 – kiplinger.com/slideshow/investing/T018-S001-25-dividend-stocks-analysts-love-the-most-2019/index.html [3/10/2020]

2 – marketwatch.com/story/the-dow-just-tumbled-into-a-bear-market-ending-the-longest-bull-market-run-in-historyheres-how-those-downturns-last-on-average-2020-03-11 [3/14/2020]

 

Business Continuity Plans: Prepare now to better protect your business

By | Advice, News

As a business owner, you’ve worked hard for your success. The long hours, the difficult decisions, and the sacrifices you have made have led to where you are today. The last thing you want is to suffer a disruption to your business. However, in the event that you do experience an unavoidable mishap­, it may be smart to have a Business Continuity Plan (BCP) in place.

What is a Business Continuity Plan (BCP)? A BCP is a document that maps out a business’ system of prevention and recovery from potential threats or disruptions. A sound BCP ensures that personnel and assets are protected and empowered to take quick action in the event of a disaster. It is important to remember that a BCP should be conceived in advance and may involve input from key stakeholders and personnel.1

What is considered a “business disruption”? In general, a “disruption” is anything that causes a business to suffer a loss due to unforeseen events, such as damage to one’s facility, the breakdown of essential machinery, a supplier failing to deliver essential goods, or a technology-related malfunction.2

What are the components of a BCP? A BCP should be unique to your business, but there are some common factors consistent among all continuity plans. Creating a business continuity plan includes four steps:

  1. Conduct a business impact analysis to identify time-sensitive or critical business functions. Be sure you have the resources to support those tasks.
  2. Identify, document, and implement processes that are essential to the recovery of your business.
  3. Create a continuity team and compile a step-by-step plan that they can enact during a business disruption.
  4. Make certain your team is trained and ready. This may take the form of testing or other exercises to evaluate the strength and viability of your recovery strategy.3

Be prepared. A BCP is only helpful if it’s put in place early and updated regularly. Some time, care, and training now may help your business weather a storm down the road. Don’t delay; start putting your business continuity plan together soon.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities.
Citations.
1 – Ready.gov, 2020
2 – Investopedia.com, 2019
3 – Ready.gov, 2020