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February 2021

Building a Healthy Financial Foundation: How many pieces do you have in place?

By Uncategorized

When you read about money matters, you will sometimes see the phrase, “getting your financial house in order.” What exactly does that mean?

When your financial “house is in order,” it means it is built on a solid foundation. It means that you have six fundamental “pillars” in place that are either crucial for sustaining your financial well-being or creating wealth.

#1: A savings account. This is your Fort Knox: the place where you store and build the cash you may someday use for your biggest purchases. Savings accounts pay a modest interest rate. You should still consider having a savings account, even in today’s low-interest rate environment. Banks and credit unions often limit the number and amount of withdrawals you can make from savings accounts per month.

#2: A checking account. This is your go-to account for everyday expenses, whether you pay your bills digitally or the old-fashioned way. Checking accounts pay a modest interest rate. Some accounts may have minimum balance requirements, so it’s best to closely read the new account information. Also, opening a checking account may lead to opening a credit card account at the same financial institution.

#3: An emergency fund. This bank account helps you deal with the unexpected. You know that label you see on fire extinguisher boxes – “break glass in case of emergency?” Only in a financial emergency should you “break into” this account. What is a financial emergency? Everyone’s definition varies, but examples include hospital bills, major car repairs, and unemployment.

#4: A workplace retirement plan account. Some want to start saving for retirement as soon as possible. Workplace retirement plans offer you a convenient way to get started. In most of these plans, your contribution is made with pre-tax dollars.1

Money saved and invested in these accounts can compound, and the compounding may become greater with time. Consistent monthly investment is the “fuel” for your account.

Regular monthly investing does not protect against a loss in a declining market or guarantee a profit in a rising market. Individuals should evaluate their financial ability to continue making purchases through periods of declining and rising prices. The return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.

#5: An Individual Retirement Arrangement (IRA). This is a tax-advantaged retirement savings account that you own. There are traditional IRAs (up-front contributions are not taxed; retirement withdrawals are) and Roth IRAs (up-front contributions are taxed; retirement withdrawals are not, provided federal tax laws are followed).2

Mandatory annual withdrawals are required from traditional IRAs starting at age 72. The money distributed to you is taxed as ordinary income; if such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty. No mandatory annual withdrawals are required from Roth IRAs while the original owner lives. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Thanks to the SECURE Act, you may contribute to Roth and traditional IRAs all your life, as long as you meet the earned-income requirement for account contributions.2

#6: A taxable investing account. This is also popularly called an investment account or brokerage account. Unlike an IRA or workplace retirement plan, the invested assets in these accounts are taxed each year. A taxable investing account gives you access to a wide range of investment products, which can help complement the other accounts in your financial foundation.

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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, 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. 

1099 Forms: Explaining the many types and their uses

By Uncategorized

What is a 1099 form? This is a record of payment from an individual or entity, showing a payment, generated for your records. The individual/entity sends a copy to both the payee as well as the I.R.S.1

Who might be sending 1099s? Clients send their contractors 1099s, recording work performed. Banks send 1099s to reflect interest from a savings account. A state may send a 1099 for a tax refund. If the financial institution who handles your retirement account writes you a check, they will also send you a 1099.1

In any event, a 1099 includes the taxpayer identification number or Social Security Number of the payee. Receiving the 1099 does not automatically mean that the payee owes tax, as there could be situations that offset that income, but it definitely means that the I.R.S. also has a record of that payment.1

There are many types of 1099 forms. Here are a few of them:

1099-A. This form is a consequence of foreclosure or bank repossession of secured real property such as one’s home if used for collateral for a loan, for example.1

1099-B. Brokers and barter exchanges report proceeds from securities, futures, commodities, or barter exchange transactions with a 1099-B.1 

1099-C. The 1099-C reports debt cancellation. if you had at least $600 of debt cancelled during the year. This includes the cancellation of debt you owe for a home, like in the case of foreclosure. This form is sent if the debt was cancelled by a bank, credit union, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Resolution Trust Corporation (RTC), another lender or financial institution, the federal government, a department of the U.S. military, the U.S. Postal Service (USPS), or the Postal Rate Commission.1

1099-CAP. The 1099-CAP goes to shareholders who received at least $1,000 as cash, stock, or other property due to an acquisition of control or a substantial change in the capital structure of a corporation.1

1099-DIV. When you receive dividends, capital gain distributions, or liquidation distributions, you get one of these. For example, when a mutual fund sells off funds and realizes a capital gain, the fund informs you of your share of the capital gain through a 1099-DIV.1

1099-G. A 1099-G is used to report $10 or more of unemployment compensation, tax refunds you got from state and local governments, agricultural payments, or taxable grants you received.1

1099-H. Your health insurance provider will send you a 1099-H if you had any portion of your health insurance premiums paid with advance payments from the health coverage tax credit (HCTC.)1

1099-INT. This form reports interest income of $10 or more, and sometimes other tax items related to interest income.1 

1099-LTC. This form reports distributions from extended care insurance contracts and accelerated death benefits paid out as a result of a life insurance contract or a viatical settlement.1

1099-MISC. This category includes “miscellaneous income,” including awards and prizes.1

1099-OID. The 1099-OID reports the difference between the stated redemption price of a bond at maturity and the issue price of that bond.1

1099-PATR. This form reports patronage dividends, such as in a farm cooperative.1

1099-Q. Have you been paying for school expenses from a 529 plan or a similar savings plan? Withdrawals will be reported on this form.1

1099-R. The 1099-R reports distributions from all types of retirement, pension, and profit-sharing plans as well as any IRA or annuity contract.1

1099-S. The 1099-S reports gross proceeds from real estate transactions or exchanges.1

1099-SA. This form reports distributions from Health Savings Accounts (HSA), Archer Medical Savings Accounts (Archer MSA), or Medicare Advantage Medical Savings Accounts (MA MSA).1

Questions? Be sure to talk with a qualified tax professional or qualified financial professional today; they can help you generate, request, and understand any of the above 1099 forms in question.

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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, 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.