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2020 Annual Financial To-do List

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What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

Can you contribute more to your retirement plans this year? In 2021, the contribution limit for a Roth or traditional individual retirement account (IRA) is expected to remain at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible.1

Remember, withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty starting again in 2021. Roth IRA distributions must meet a five-year holding requirement and occur after age 59½ to qualify for tax-exempt and penalty-free withdrawal. Tax-free and penalty-free withdrawals from Roth IRAs can also be taken under certain other circumstances, such as a result of the owner’s death.2

Keep in mind, this article is for informational purposes only, and not a replacement for real-life advice. Also, tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead.

Make a charitable gift. You can claim the deduction on your tax return, provided you follow the Internal Review Service (I.R.S.) guidelines and itemize your deductions with Schedule A. The paper trail is important here. If you give cash, you should consider documenting it.  Some contributions can be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the I.R.S. does not equate a pledge with a donation. If you pledge $2,000 to a charity this year but only end up gifting $500, you can only deduct $500.3

These are hypothetical examples and are not a replacement for real-life advice. Make certain to consult your tax, legal, or accounting professional before modifying your record-keeping approach or your strategy for making charitable gifts.

See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with home-based businesses.4

Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,600 contribution for 2021 if you are single; $7,200 if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55.5

If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Pay attention to asset location. Tax-efficient asset location is one factor that can be considered when creating an investment strategy.

Review your withholding status. Should it be adjusted due to any of the following factors?

  • You tend to pay the federal or state government at the end of each year.
  • You tend to get a federal tax refund each year.
  • You recently married or divorced.
  • You have a new job, and your earnings have been adjusted.

These are general guidelines and are not a replacement for real-life advice. Make certain to consult your tax, human resources, or accounting professional before modifying your withholding status.

Did you get married in 2020? If so, it may be an excellent time to consider reviewing the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. If you are preparing to have a new last name in 2021, you may want to get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted?

Are you coming home from active duty? If so, go ahead and check on the status of your credit and any tax and legal proceedings that might have been preempted by your orders.

Consider the tax impact of any upcoming transactions. Are you planning to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2021? Do you anticipate selling an investment that is held outside of a tax-deferred account?

If you are retired and in your seventies, remember your RMDs. In other words, Required Minimum Distributions (RMDs) from retirement accounts. Under the SECURE ACT, in most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts.6

Vow to focus on your overall health and practice sound financial habits in 2021. And don’t be afraid to ask for help from professionals who understand your individual situation.

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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. 

Citations.

1. thefinancebuff.com, August 12, 2020
2. usnews.com, February 12, 2020
3. irs.gov, April 3, 2020
4. nerdwallet.com, July 31, 2020
5. msn.com, August 19, 2020
6. thestreet.com, December 21, 2019

End-of-the-Year Money Moves

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Here are some things you might consider before saying goodbye to 2020.

 

What has changed for you in 2020? For many, this year has been as complicated as learning a new dance. Did you start a new job or leave a job behind? That’s one step. Did you retire? There’s another step. Did you start a family? That’s practically a pirouette. If notable changes occurred in your personal or professional life, then you may want to review your finances before this year ends and 2021 begins. Proving that you have all of the right moves in 2020 might put you in a better position to tango with 2021.

Even if your 2020 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your overall personal finances.

Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal, and accounting professionals before modifying your tax strategy.

Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. You might want to consider this move, but it should be made with the guidance of a financial professional you trust.1

In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that amount can be carried forward to offset capital gains in upcoming years.1

Do you want to itemize deductions? You may just want to take the standard deduction for the 2020 tax year, which has risen to $12,400 for single filers and $24,800 for joint. If you do think it might be better for you to itemize, now would be a good time to get the receipts and assorted paperwork together.2,3

Could you ramp up your retirement plan contributions? Contribution to these retirement plans may lower your yearly gross income. If you lower your gross income enough, you might be able to qualify for other tax credits or breaks available to those under certain income limits.4

Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2020 ends? Your gift may qualify as a tax deduction. For some gifts, you may be required to itemize deductions using Schedule A.4

While we’re on the topic of year-end moves, why not take a moment to review a portion of your estate strategy. Specifically, take a look at your beneficiary designations. If you haven’t reviewed them for some time, double-check to see that these assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up-to-date.

Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form so far, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year? New Year’s Eve may put you in a dancing move, eager to say goodbye to the old year and welcome 2021. Before you put on your dancing shoes, consider speaking with a financial or tax professional. Do it now, rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

Taxable Events in Retirement Accounts

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What triggers a tax liability for an individual or a trust?

 

When you distribute, sell, or receive assets from a retirement account, taxes usually follow. It is true for individuals; it is true for trusts. These decisions represent taxable events.

Many retirement accounts are tax-deferred, but not tax-exempt. So, at some point, a “day of reckoning” arrives for these accounts, and taxes are due. The tax liability may differ greatly, depending on account ownership.

Trust income is now taxed much more than individual income. This is a result of the Tax Cuts and Jobs Act of 2017.1

As an example, in 2019, a trust could earn up to $2,650 in taxable income without federal taxes on its qualified dividends or capital gains. That threshold was almost 15 times higher ($39,375) for an individual. Factor in a $12,200 standard deduction in that same year, and an individual could potentially have up to $51,575 in qualified dividends to manage their federal income tax liability.1

Additionally, an individual has to have net investment income or modified adjusted gross income in excess of $200,000 per year to face the 3.8% net investment income tax (NIIT). Compare that with a trust: the threshold is just $12,750.2

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

Say an investment in your retirement account is sold for a capital gain. If it has been held in your account for less than a year, that capital gain is short term; short-term capital gains are usually taxed at the same rate as earned income. If those shares have been in your account for more than a year, then long-term capital gains tax rates likely apply, which are either 0% or 15% for most individuals.3

A trust also faces the possibility of capital gains tax in this situation whether it distributes the gain or it doesn’t. Both trusts and individuals can use capital losses to offset capital gains.1,4

Suppose you receive dividends in a retirement account. In an ordinary brokerage account, qualified dividends are taxable annually whether the money is distributed, reinvested, or left in cash. The threshold for taxation of qualified dividends is much lower for a trust than for an individual. Reinvested dividends in an Individual Retirement Account (IRA) are not taxed.1,5

Regarding IRAs, it is important to note that distributions from traditional IRAs must generally begin once you reach age 72. The money distributed to you is taxed as ordinary income. When such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty, although the CARES Act allows some exceptions to the penalties for 2020. (You may continue to contribute to a Traditional IRA past age 70½ under the SECURE Act as long as you meet the earned-income requirement.)6

How are taxable events in retirement accounts reported, and when are taxes withheld? Each tax year, Form 1099s tell the story. The 1099-DIV tracks dividends, the 1099-INT displays interest income, and the 1099-R shows distributions out of pensions, IRAs, retirement plans, and insurance contracts.7

Now to withholding. Distributions from employee retirement plans have taxes withheld unless a trustee-to-trustee transfer occurs (i.e., the invested assets go seamlessly from one retirement plan to another, with the individual or trust never taking possession of them). The withholding rate in such instances is 20%. An IRA owner can choose not to withhold tax from an IRA distribution; otherwise, the withholding rate is 10%. There is no withholding at all, of course, on investment income from a taxable brokerage account or capital gains and losses.8

Keep in mind that this article is for informational purposes only and not a replacement for real-life advice. Also, tax rules are constantly changing, and there is no guarantee that the tax treatment of IRAs and other qualified retirement plans will remain the same in years ahead, for individual taxpayers or trusts.

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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. 

Citations.

  1. The Tax Adviser, April 25, 2019
  2. Internal Revenue Service, May 28, 2020
  3. Tax Policy Center, May 2020
  4. CRRCPA.com, August 27, 2019
  5. Investopedia, January 21, 2020
  6. TheStreet, May 13, 2020
  7. Nolo.com, August 12, 2020

8. The Balance, July 14, 2020

Why Regular Rebalancing Makes Sense

By | Uncategorized

Everyone loves a winner. If an investment is successful, most people naturally want to stick with it. But is that the best approach?

It may sound counterintuitive, but it may be possible to have too much of a good thing. Over time, the performance of different investments can shift a portfolio’s intent – and its risk profile. It’s a phenomenon sometimes referred to as “risk creep,” and it happens when a portfolio has its risk profile shift over time.

When deciding how to allocate investments, many start by taking into account their time horizon, risk tolerance, and specific goals. Next, individual investments are selected that pursue the overall objective. If all the investments selected had the same return, that balance – that allocation – would remain steady for a period of time. But if the investments have varying returns, over time, the portfolio may bear little resemblance to its original allocation.

Rebalancing is the process of restoring a portfolio to its original risk profile. Remember, asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

There are two ways to rebalance a portfolio.

The first is to use new money. When adding money to a portfolio, allocate these new funds to those assets or asset classes that have fallen. For example, if bonds have fallen from 40% of a portfolio to 30%, consider purchasing enough bonds to return them to their original 40% allocation. Diversification is an investment principle designed to manage risk. However, diversification does not guarantee against a loss.

The second way of rebalancing is to sell enough of the “winners” to buy more underperforming assets. Ironically, this type of rebalancing actually forces you to buy low and sell high.

Keep in mind, however, that the information in this material is not intended as tax advice, and may not be used for the purpose of avoiding any federal tax penalties. Please consult your tax professional before rebalancing. The process may result in a taxable event.

Periodically rebalancing your portfolio to match your desired risk tolerance is a sound practice regardless of the market conditions. One approach is to set a specific time each year to schedule an appointment to review your portfolio and determine if adjustments are appropriate.

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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.

Conquering Retirement Challenges for Women

By | Uncategorized

When it comes to retirement, some women face obstacles that can make saving for retirement a challenge. Women typically earn less than their male counterparts and often take time out of the workforce to care for children or other family members. Added to the fact that women typically live longer than men, retirement money for women may need to stretch even further.1

Despite these challenges, there are a lot of reasons to be hopeful.2

Review your existing situation. Do you want to spend your years traveling together, or do you envision staying closer to home? Are you seeing yourself moving to a retirement community, or do you want to live as independently as you can? Sit down with your spouse, if you’re married, to discuss your visions for retirement.

You can’t see if you’re on track for your goals if you haven’t defined them. And if you find you’re falling short of where you want to be, you can work together to strategize about how you can either get to where you want to go or to adjust your strategy so that it fits your existing situation.1

Get creative. These challenges don’t have to stop you from saving for retirement if you’re willing to get creative. If you plan to or have taken off time from the workforce, try and increase your contributions to your retirement accounts while you are working. If you’re staying home while your spouse works, you may be able to contribute to an individual retirement account.3

Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account and other retirement plans in most circumstances.  Withdrawals from Traditional IRAs are taxes as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Under the CARES Act, the 10% penalty may be waived in 2020. Traditional IRA may be fully or partially deductible, depending on your adjusted gross income.

If you’re caregiving for an elderly relative, there are ways to be paid for your time. According to AARP, the Veteran’s Administration or Medicaid may be a potential source of income. Working with a professional who has expertise in this field can help you navigate the complicated medical structure while also helping you earn income for work that you’re doing.3

Get involved. One of the best things you can do is to get involved in conversations about finances. Many women undervalue their knowledge in this area and having regular conversations with your spouse, family, and financial professional can help ensure that you always know where things stand.3

While women may face additional challenges, careful preparation with your financial professional may help you to live a fulfilling retirement.

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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.

Citations

1. CNBC.com, March 6, 2020
2. Entrepreneur.com, August 13, 2020
3. MarketWatch.com, March 6, 2020

A Checklist for When a Spouse or Parent Passes

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When you lose a spouse, partner, or parent, the grief can be overwhelming. In the midst of that grief, life goes on. There are arrangements to be made, things to be taken care of – and in recognition of this reality, here is a checklist that you may find useful at such a time.

First, gather documents. Ask for help from other family members if you need it. Start by gathering the following.

  • A will, a trust, or other estate documents. If none of these exist, you could face a longer legal process when settling the person’s estate. If a trust exists, consider contacting the professional or firm who helped set up the document.
  • A life insurance policy. As a rule, you will need the death certificate, with the cause of death listed, to move forward with any claim.
  • A Social Security card/number. Generally, the person’s Social Security number will be retired shortly following the death.

Then, gather these additional highly important items.

  • Bank account, investment account, and retirement plan statements
  • Deeds/titles to real estate
  • Car titles or lease agreements
  • Storage space keys/account records
  • Safe deposit box keys
  • Any bills due or records of credit card statements
  • Any social media platforms, if applicable

Last, but not least, look for a computer file or printout with digital account passwords. Prior to their loved one’s passing, some family members may try to centralize all this information or state where it can be found.

In addition, see if the person left a letter of instructions. A letter of instructions is not a legal document; it’s a letter that provides additional and more-personal information regarding an estate. It can be addressed to whomever you choose, but typically, letters of instructions are directed to the executor, family members, or beneficiaries.

Next, take care of some immediate needs. One, contact a funeral home to arrange a viewing, cremation, or burial, in accordance with the wishes of the deceased.

Two, call or email the county clerk or recorder to request 10 to 12 death certificates; a funeral home director can often help you with this matter. (Counties usually charge a small fee for each copy issued.) Ten to 12 copies may seem excessive, but you may need that many while working with insurance companies and various financial institutions.1

Three, if the person was still working, contact the human resources officer at your loved one’s workplace to inform them what has happened. The HR officer might need you to fill out some paperwork pertaining to retirement plans, health benefits, and compensation for unused vacation time.

Four, consider speaking with an attorney – ideally, this is the lawyer who helped your loved one create a will or estate plan. Should your loved one die without a will, you may want to contact a lawyer, anyway, for an overview of how the probate process will work and see to what degree you might become liable for your loved one’s debt.

Five, resolve to keep track of any recurring debts that your loved one had set to autopay. The monthly bills for these debts should now be put in your name and paid from your accounts. (Creditors can be sympathetic in these situations and maybe lenient with you if you ask.)

Following these steps, address financial, insurance, and credit matters. Investment and retirement plan accounts and insurance policies should have beneficiaries, so reach out to the financial and insurance professionals who helped your loved one as well as the person overseeing their workplace retirement plan. Talk with these professionals to learn about your options as a beneficiary and the possible tax implications from inheriting these assets.

You will also probably need to update the listed beneficiaries on any investment accounts you inherit. (The same applies to your own will, insurance policies, and estate strategy.) Titles and deeds for real estate, cars, and trucks also need updating.

If you have lost your spouse, check with Social Security to see what spousal and survivor benefits you might be eligible to receive. If your spouse was a veteran, the Veteran’s Administration will want to know of their death, as you may be due spousal benefits.

Certain employers and labor unions may offer pensions or life insurance benefits to spouses of past employees or members. If your late spouse once worked for a large employer or belonged to a union, this is something to ask about.

Notify creditors and credit card companies that were part of your loved one’s credit history. You can close accounts held solely by the deceased; those jointly held will need to have your loved one’s name removed from them. Creditors may want to know when existing debts will be paid, either by you or your loved one’s estate. You can also notify the “big three” credit bureaus – Experian, Equifax, and TransUnion – of their passing, which can be done online, over the phone, or by letter.2

State and federal taxes for your loved one will also need to be paid, and possibly, other taxes for the year of their death; talk with a tax professional about this.

Are you the parent of a college student? Your student may now be eligible for a greater degree of financial aid. Ask your child to speak with a financial aid officer about this.

If your loved one owned a small business or professional practice, a discussion with business partners (and clients) may be necessary as well as a consultation with the attorney who advised that business.

Look after your future. Your retirement and estate strategies are poised for change because of this life event. The way you invest and the amount you save for the future may change, especially in relation to your household’s change in expenses, income, and assets. So, a chat with a financial professional in the weeks or months ahead may be in order.

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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.

Citations

1. Nolo, July 30, 2020

2. Credit.com, February 14, 2020

How Much Money Will You Need for Retirement?

By | Uncategorized

“Will I outlive my retirement money?” That’s one of the top fears for people who are starting to prepare for their retirement years.

So I have to chuckle a bit when I see headlines that say, “Here’s how much money Americans think they need to retire comfortably.”1

$1.9 million is the number, according to a nationwide survey of 1,000 employed 401(k) participants by a well-known financial services company. In 2019, the same survey reported the number was $1.7 million. But this year’s pandemic increased the total by $200,000.2

Is $1.9 million a realistic figure for retirement? It’s hard to say. The survey didn’t ask participants how they arrived at that figure or what information they used to draw that conclusion.

Determining how much money you need in retirement is a process. It shouldn’t be a number that you pull out of thin air.

The process should include looking at your current financial situation and developing an approach based on your goals, time horizon, and risk tolerance. The process should take into consideration all your potential sources of retirement income, and also may project what your income would look like each year in retirement.

A significant figure like $1.9 million does little good if you’re uncertain what it means for your retirement years. We can help you develop a retirement strategy and show you investment ideas designed to help you pursue the retirement of your dreams.

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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. 

Citations.

FoxBusiness.com, August 4, 2020

Pressroom.aboutshwab.com, August 4, 2020

Financial Strategies for Young Families

By | Uncategorized

The hardest part is getting started. Even though more than half of U.S. households have some form of investment in the stock market, many new parents may still find that creating a financial strategy is the last thing on their minds. And who can blame them? After all, new parents have a million concerns to keep in mind on top of any unexpected financial pressure that may arise. But for young families with discretionary income, creating a financial strategy may be easier than they realize.1

Remember that investing involves risk, and the return and principal value of investments will fluctuate as market conditions change. Investment opportunities should take into consideration your goals, time horizon, and risk tolerance. When sold, investments may be worth more or less than their original cost. Past performance does not guarantee future results.

What’s your end goal? What expenses do you anticipate in 5, 10, or even 15 years from now? These can be tough questions to answer while raising a family.

Establishing your investments’ goal or goals is one of the many ways your financial professional can help. Before your first meeting, jot down all the financial questions you can think of – no matter how silly they may seem to you. These answers can help define your family’s short-term and long-range financial goals.

Once you start, try not to stop. If you have already started investing, congratulations may be in order! In getting an early start, you have taken advantage of a powerful financial asset: time. However, don’t overlook the power of consistency. For some, consistent investing may be the most realistic pathway to pursuing their financial goals.

For those who haven’t started, that’s okay too. Remember, it doesn’t always take a lump sum to begin. Even auto-depositing $100 a month into an account is a step toward your family’s goals. And who knows? As your family’s circumstances change, you may be able to contribute even more over time.

There is no “one way.” The point is that there isn’t a single, one-size-fits-all solution for young families that are looking to invest in their future. Financial professionals also know this and can help craft a strategy suited to your risk tolerance, goals, and financial situation.

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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. 

Traditional Vs. Roth IRA: Do you know the difference?

By | Uncategorized

Provided by American Wealth Management

Traditional Individual Retirement Accounts (IRA), which were created in 1974, are owned by roughly 33.2 million U.S. households. Roth IRAs, however, were created as part of the Taxpayer Relief Act in 1997, are owned by nearly 22.5 million households.1

Both are IRAs. And yet, each is quite different.

Know the limits. Up to certain limits, traditional IRAs allow individuals to make tax-deductible contributions into the account. Distributions from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10-percent federal income tax penalty. Remember, under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Additionally, you may continue to contribute to a Traditional IRA past age 70½, under the SECURE Act, as long as you meet the earned-income requirement.

Filing single. For singles, the maximum tax-deductible contribution starts shrinking once your modified adjusted gross income (MAGI) reaches $65,000. Singles with adjusted incomes of $75,000 and above are not eligible for a tax deduction.2

Filing jointly. For those who are married and filing jointly, things are a bit more complicated. If you or your spouse makes an IRA contribution that is covered by a workplace retirement plan, the deduction begins phasing out when your adjusted gross income is at $104,000, and it disappears at $124,000. However, if you do not have a workplace plan, but your spouse does (or vice versa), the 2020 limit starts at $196,000, and no tax deduction is allowed once the contributor’s income reaches $206,000.

Also, within certain limits, individuals can make contributions to a Roth IRA with after-tax dollars. To qualify for a tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½.3

Income impacts total contributions. Like a traditional IRA, contributions to a Roth IRA are limited based on income. For 2019, contributions to a Roth IRA are phased out between $193,000 and $203,000 for married couples filing jointly and between $122,000 and $137,000 for single filers.

Contribution limits. In addition to distribution rules, there are limits on how much can be contributed each year to either IRA. In fact, these limits apply to any combination of IRAs; that is, workers cannot put more than $6,000 per year into their Roth and traditional IRAs, combined. So, if a worker contributed $3,500 in a given year into a traditional IRA, their contributions to a Roth IRA would be limited to $2,500 during that same year.4

Catch-up contributions. Individuals who reach age 50 or older by the end of the tax year can qualify for “catch-up” contributions. The combined limit for these is $7,000.5

Let’s chat. When it comes to picking an IRA, both traditional and Roth IRAs may play an important role in your retirement strategy. If you have any questions, let’s chat soon about how these products may be a good fit for your goals.

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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. 

Citations.

1 – irs.gov/retirement-plans/individual-retirement-arrangements-iras, [01/09/2020]

2 – irs.gov/retirement-plans/ira-deduction-limits, [12/20/2019]

3 – irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan [01/08/2020]

4 – irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits [02/07/2020]

5 – Internal Revenue Service, 2019. The Tax Cuts and Jobs Act of 2017 eliminated the ability to “undo” a Roth conversion.

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.