Getting a Jump on Tax Season

What should you bring to your preparer?     

You can file your federal tax return starting January 20. IRS filing season will start right on time in 2015, and there is wisdom in filing your 1040 well before April 15. You can get it out of the way earlier, and if you e-file, you can put yourself in position for an earlier refund.¹

What should you gather up for your CPA? If you want to save time and possibly money along with it, come to your preparer’s office ready with the appropriate paperwork. If you own a business, that list includes all W-2s and 1099-MISC forms you get from clients, any 1099-INT and K-1 forms displaying interest income, your Schedule C and P&L reports, and any and all paperwork you can round up detailing your expenses – your personal expenses too, not only business costs but also any tuition, medical and miscellaneous ones. If you have made charitable contributions worth itemizing, that paperwork needs to reach your preparer. The same goes for documents detailing mortgage interest, other forms of interest paid, and any tax already paid.²

If you have receipt management software, your CPA will love you for using it (beats getting a manila envelope, file folder or shoebox full of receipts to sort through). If a calamity or an accident destroyed a bunch of your business records, remember that the IRS may give you a break – but your CPA needs solid proof of the misfortune to try and make a case to the IRS and get you some leniency.

What are some things people too often forget to bring? Social Security numbers for new babies (and taxpayer-ID numbers and contact information for the nannies of those babies). Logs of unreimbursed mileage. Real estate stuff, too: closing letters related to a refi, receipts for real estate taxes (assuming they haven’t been paid through escrow).³

If you received any health insurance subsidies, you may want to wait until February. Did you pay for your own health insurance in 2014? Do you remember how you had to estimate your 2014 income when you applied for coverage? If you got a subsidy, it was based on that estimate, and an estimate is by definition inexact. Some taxpayers ended up earning more than the incomes they estimated to the exchanges, some less. That could mean one of two things: a big 2014 tax refund, or owing thousands more in taxes.⁴

If you pay for your own health coverage, the exchange at which you bought it should send you Form 1095-A by January 31. Form 1095-A will list how your household self-insures: who pays premiums, and the amount of any monthly subsidies. Your CPA can plug these details into Form 8962, which explains the breakdown on insurance, subsidies and income for your household to the IRS. If you were only self-insured for part of 2014, your CPA must note any subsidy payments by the month.⁴

Should you jump to a new CPA? If he or she is aloof, sloppy, or seems more like a file clerk than someone interested in minimizing your tax burden, maybe you should switch. There are some tax preparers who outsource their work to people overseas, and you probably don’t want that to happen to your return. We are early in 2015, and if you really have the itch to switch, consider taking your 2013 return to 2-3 candidates – not only to get a tax prep quote, but to see if they have insight on your situation that your current preparer lacks.⁵

In getting a jump on tax season, you can get that bothersome item off your to-do list sooner and focus on the more exciting parts of your career, business or life.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600

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 - forbes.com/sites/robertwood/2014/12/29/irs-announces-2014-tax-return-filing-opens-starting-january-20-2015/ [12/29/14]

2 - outright.com/blog/what-do-you-need-to-bring-to-your-accountant-at-tax-time/ [3/18/14]

3 - foxbusiness.com/personal-finance/2014/03/18/what-documents-should-take-to-tax-preparer/ [3/18/14]

4 - money.cnn.com/2015/01/02/pf/taxes/obamacare-income-tax-subsidies/ [1/2/15]

5 - dailyfinance.com/2014/12/25/hire-cpa-prepare-taxes/ [12/25/14]

Guarding Against Identity Theft

Take steps so criminals won’t take vital information from you. 

America is enduring a data breach epidemic. As 2013 ended, the federal Bureau of Justice Statistics released its 2012 Victims of Identity Theft report. Its statistics were sobering. About one in 14 Americans aged 16 or older had been defrauded or preyed upon in the past 12 months, more than 16.6 million people.¹

Just 8% of those taken advantage of had detected identity theft through their own vigilance. More commonly, victims were notified by financial institutions (45%), alerts from non-financial companies or agencies (21%), or notices of unpaid bills (13%). While 86% of victims cleared up the resulting credit and financial problems in a day or less, 10% of victims had to struggle with them for a month or more. ¹

Consumers took significant financial hits from all this. The median direct loss from cyberthieves exploiting personal information in 2012 was $1,900, and the median direct loss from a case of credit card fraud was $200. While much of the monetary damage is wiped away for the typical victim, that isn’t always the case.¹

Tax time is prime time for identity thieves. They would love to get their hands on your return, and they would also love to claim a phony refund using your personal information. In 2013, the IRS investigated 1,492 identity theft-linked crimes – a 66% increase from 2012 and a 441% increase from 2011.²  

E-filing of tax returns is becoming increasingly popular (just make sure you use a secure Internet connection). When you e-file, you aren’t putting your Social Security number, address and income information through the mail. You aren’t leaving Form 1040 on your desk at home (or work) while you get up and get some coffee or go out for a walk. If you just can’t bring yourself to e-file, then think about sending your returns via Certified Mail. Those rough drafts of your returns where you ran the numbers and checked your work? Shred them. Use a cross-cut shredder, not just a simple straight-line shredder (if you saw Argo, you know why).  

The IRS doesn’t use unsolicited emails to request information from taxpayers. If you get an email claiming to be from the IRS asking for your personal or financial information, report it to your email provider as spam.²   

Use secure Wi-Fi. Avoid “coffee housing” your personal information away – never risk disclosing financial information over a public Wi-Fi network. (Broadband is susceptible, too.) It takes little sophistication to do this – just a little freeware.  

Sure, a public Wi-Fi network at an airport or coffee house is password-protected – but if the password is posted on a wall or readily disclosed, how protected is it? A favorite hacker trick is to sit idly at a coffee house, library or airport and set up a Wi-Fi hotspot with a name similar to the legitimate one. Inevitably, people will fall for the ruse and log on and get hacked.  

Look for the “https” & the padlock icon when you visit a website. Not just http, https. When you see that added “s” at the start of the website address, you are looking at a website with active SSL encryption, and you want that. A padlock icon in the address bar confirms an active SSL connection. For really solid security when you browse, you could opt for a VPN (virtual private network) service which encrypts 100% of your browsing traffic; it may cost you $10 a month or even less.³ 

Make those passwords obscure. Choose passwords that are really esoteric, preferably with numbers as well as letters. Passwords that have a person, place and time (PatrickRussia1956) can be tougher to hack.⁴ 

Check your credit report. Remember, you are entitled to one free credit report per year from each of the big three agencies (Experian, TransUnion, Equifax). You could also monitor your credit score – Credit.com has a feature called Credit Report Card, which updates you on your credit score and the factors influencing it, such as payments and other behaviors.¹    

Don’t talk to strangers. Broadly speaking, that is very good advice in this era of identity theft. If you get a call or email from someone you don’t recognize – it could tell you that you’ve won a prize, it could claim to be someone from the county clerk’s office, a pension fund or a public utility – be skeptical. Financially, you could be doing yourself a great favor.

Kim Bolker may be reached at 616-942-8600 or kbolker@sigmarep.com

This material was prepared by MarketingLibrary.Net 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 - dailyfinance.com/2013/12/31/scariest-identity-theft-statistics/ [12/31/13]

2 - csmonitor.com/Business/Saving-Money/2014/0317/Tax-filing-online-Seven-tips-to-avoid-identity-theft.-video [3/17/14]

3 - forbes.com/sites/amadoudiallo/2014/03/04/hackers-love-public-wi-fi-but-you-can-make-it-safe/ [3/4/14]

4 - articles.philly.com/2014-03-18/business/48301317_1_id-theft-coverage-identity-theft-adam-levin [3/18/14]

Organizing Your Paperwork for Tax Season

If you haven’t done it, now’s the time.

How prepared are you to prepare your 1040? The earlier you compile and organize the relevant paperwork, the easier things may be for you (or the tax preparer working for you) this winter. Here are some tips to help you get ready:

As a first step, look at your 2012 return. Unless your job, living situation or financial situation has changed notably since you last filed your taxes, chances are you will need the same set of forms, schedules and receipts this year as you did last year. So open that manila folder (or online vault) and make or print a list of the items that accompanied your 2012 return. You should receive the TY 2013 versions of everything you need by early February at the latest.

How much documentation is needed? If you don’t freelance or own a business, your list may be short: W-2(s), 1099-INT(s), perhaps 1099-DIVs or 1099-Bs, a Form 1098 if you pay a mortgage, and maybe not much more. Independent contractors need their 1099-MISCs, and the self-employed need to compile every bit of documentation related to business expenses they can find: store and restaurant receipts, mileage records, utility bills, and so on.¹

In totaling receipts, don’t forget charitable donations. The IRS wants all of them to be documented. A taxpayer who donates $250 or more to a qualified charity needs a written acknowledgment of such a donation. If your own documentation is sufficiently detailed, you may deduct $0.14 for each mile driven on behalf of a volunteer effort for a qualified charity.¹

Or medical expenses & out-of-pocket expenses. Collect receipts for any expense for which your employer doesn't reimburse you, and any medical bills that came your way last year.

If you’re turning to a tax preparer, stand out by being considerate. If you present clean, neat and well-organized documentation to a preparer, that diligence and orderliness will matter. You might get better and speedier service as a result: you are telegraphing that you are a step removed from the clients with missing or inadequate paperwork.

Make sure you give your preparer your federal tax I.D. number (TIN), and remember that joint filers must supply TINs for each spouse. If you claim anyone as a dependent, you will need to supply your preparer with that person’s federal tax I.D. number. Any dependent you claim has to have a TIN, and that goes for newborns, infants and children as well. So if your kids don’t have Social Security numbers yet, apply for them now using Form SS-5 (available online or at your Social Security office). If you claim the Child & Dependent Care Tax Credit, you will need to show the TIN for the person or business that takes care of your kids while you work.^1,3  

While we’re on the subject of taxes, some other questions are worth examining... 

How long should you keep tax returns? The IRS statute of limitations for refunds is 3 years, but if you underreport taxable income, fail to file a return or file a claim for a loss from worthless securities or bad debt deduction, it wants you to keep them longer. You may have heard that keeping your returns for 7 years is wise; some CPAs and tax advisors will tell you to keep them for life. If the tax records are linked to assets, you will want to retain them for when you figure out the depreciation, amortization, or depletion deduction and the gain or loss. Insurers and creditors may want you to keep federal tax returns indefinitely.² 

Can you use electronic files as records in audits? Yes. In fact, early in the audit process, the IRS may request accounting software backup files via Form 4564 (the Information Document Request). Form 4564 asks the taxpayer/preparer to supply the file to the IRS on a flash drive, CD or DVD, plus the necessary administrator username and password. Nothing is emailed. The IRS has the ability to read most tax prep software files. For more, search online for “Electronic Accounting Software Records FAQs.” The IRS page should be the top result.⁴ 

How do you calculate cost basis for an investment? A whole article could be written about this, and there are many potential variables in the calculation. At the most basic level with regards to stock, the cost basis is original purchase price + any commission on the purchase. 

So in simple terms, if you buy 200 shares of the Little Emerging Company @ $20 a share with a $100 commission, your cost basis = $4,100, or $20.50 per share. If you sell all 200 shares for $4,000 and incur another $100 commission linked to the sale, you lose $200 – the $3,900 you wind up with falls $200 short of your $4,100 cost basis.⁵

Numerous factors affect cost basis: stock splits, dividend reinvestment, how shares of a security are bought or gifted. Cost basis may also be “stepped up” when an asset is inherited. Since 2011, brokerages have been required to keep track of cost basis for stocks and mutual fund shares, and to report cost basis to investors (and the IRS) when such securities are sold.⁵  

P.S.: this tax season is off to a late start. Business filers were able to send in federal tax returns starting January 13, but the start date for processing 1040 and 1041 forms was pushed back to January 31. Per federal law, the April 15 deadline for federal tax returns remains in place, as does the 6-month extension available for those who file IRS Form 4868.^6,7

Kim Bolker may be reached at 616-942-8600 or kbolker@sigmarep.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - bankrate.com/finance/taxes/7-ways-to-get-organized-for-the-tax-year-1.aspx [1/6/14]

2 - irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-long-should-I-keep-records [8/8/13]

3 - irs.gov/Individuals/International-Taxpayers/Taxpayer-Identification-Numbers-%28TIN%29 [1/17/14]

4 - irs.gov/Businesses/Small-Businesses-&-Self-Employed/Use-of-Electronic-Accounting-Software-Records;-Frequently-Asked-Questions-and-Answers [5/22/13]

5 - turbotax.intuit.com/tax-tools/tax-tips/Rental-Property/Cost-Basis--Tracking-Your-Tax-Basis/INF12037.html [1/23/14]

6 - irs.gov/uac/Newsroom/Starting-Jan.-13-2014-Business-Tax-Filers-Can-File-2013-Returns [1/9/14]

7 - irs.gov/taxtopics/tc301.html [1/22/14] 

What’s Next in the Debt Ceiling Debate?

Implications for the short term & the long term.

In January, will the federal government be shuttered again? At first thought, it seems inconceivable that Congress would want to go through another protracted fight like the one that shut things down for 16 days in October. That could occur, however, if a new budget panel doesn’t meet its deadline.

Once more, the clock is ticking. By December 13, a group of 30 senators and representatives have to hammer out a bipartisan budget agreement. It must a) reconcile the markedly different House and Senate FY 2014 budget plans passed earlier in 2013, and b) map out a longer-term plan to shrink the federal deficit. If a) doesn’t happen, then the country will be threatened with another federal shutdown on January 15. If b) doesn’t happen, then another round of sequester cuts from the 2011 Budget Control Act will be initiated as of that same date.^1,2,3,4

Does this seem like déjà vu? It does among many political and economic analysts, who fear a repeat of the supercommittee debacle of 2011, when a bicameral, bipartisan group of 12 Capitol Hill legislators just gave up trying to find a way to shave $2 trillion from the deficits projected for the next decade.⁴

This new committee is bigger, and like the supercommittee, its leaders are far apart politically. Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) are the budget chairs of their respective chambers of Congress. The key difference lies in the modesty of its ambition. On October 18, Murray told Bloomberg that the committee would aim for “a budget path for this Congress in the next year or two, or further if we can” rather than a “grand bargain” across the next 10 years.^1,3

Will they manage that? Some observers aren’t sure. Murray co-chaired the failed supercommittee of 2011, and while Ryan was quiet during the fall budget fight, he recently authored an op-ed piece for the Wall Street Journal reiterating his controversial ideas to slash the deficit by reforming entitlement programs. Still, Sen. Lindsey Graham (R-SC) told Bloomberg that “there’s a real desire to take another effort, not at a grand bargain, but at a sequestration replacement,” and Sen. Jeff Sessions (R-AL) commented that “we don’t want to raise expectations above reality, but I think there’s some things we could do.”^1,3,5

Leaders from of both parties maintain there will be no shutdown in January. Senate Minority Leader Mitch McConnell (R-KY) stated that a shutdown is “off the table” this winter. On CNN’s State of the Union, Sen. John McCain (R-AZ) warned that the public would not tolerate “another repetition of this disaster”; on ABC’s This Week, House Minority Leader Nancy Pelosi (D-CA) said she sympathized with the public’s “disgust at what happened.” These comments do not necessarily imply expedient negotiations ahead.^3,6 

The short-term fix didn’t fix everything. As a FY 2014 budget hasn’t yet been agreed upon, the Treasury is still relying on stopgap funding to keep the federal government running through January 15 and “extraordinary measures” to raise the federal debt limit through February 7.²

The long-term outlook for America’s credit rating didn’t really change. Fitch put its outlook for the U.S. on “negative” and warned of a potential downgrade; Dagong, the major Chinese credit ratings agency, actually downgraded the U.S. from A to A-. Even so, S&P and Moody’s didn’t take action as a result of October’s shutdown; while S&P thinks the shutdown will cut 0.6% off of Q4 GDP, it still gives the U.S. an AA+ rating (downgraded from AAA in 2011).^7,8

America lacks top-notch credit ratings, but few nations have them. In fact, only 11 countries possess the coveted AAA rating from S&P and Fitch plus the leading Aaa rating from Moody’s. If you look at S&P’s ratings for the globe’s ten largest economies, Germany is the only one with an AAA. China gets an AA- with a “stable” outlook and Japan has an AA- with a “negative” outlook. While Russia has the world’s eighth biggest economy, Moody’s, Fitch and S&P all rate it one grade above junk bond status.⁷

Is Wall Street all that worried about another shutdown? At the moment, no – because there are several reasons why the next debt debate could be less painful. As the goal appears to be a near-term bargain instead of a grand one, it may be more easily realized. If the newly appointed budget panel fails, the economy can probably weather $20 billion of 2014 sequester cuts. Also, many mid-term elections are scheduled for 2014; do congressional incumbents really want to damage their reputations further with another shameful stalemate?⁸

While confidence on Wall Street and Main Street would erode with a repeat shutdown, the Treasury might face a slightly easier challenge in January than it did in October. Sequester cuts would trim the already-shrinking federal deficit further in early 2014, conserving some federal money. As a Goldman Sachs research note just cited, Fannie Mae and Freddie Mac could also make their dividend payments to the Treasury early in Q1, which would also help.⁸ 

Global investors can’t really back away from America. The dollar is still the world’s reserve currency, and China owns about $1.3 trillion of our Treasuries. Those two facts alone should compel our legislators to work things out this winter, hopefully before the last minute.⁷

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - cnn.com/2013/10/17/politics/budget-talks-whats-next [10/17/13]

2 - csmonitor.com/USA/DC-Decoder/2013/1017/A-new-shutdown-clock-is-ticking.-Can-Washington-avoid-a-rerun-video [10/17/13]

3 - bloomberg.com/news/2013-10-18/obama-s-goal-of-grand-budget-deal-elusive-as-talks-begin.html [10/18/13]

4 - tinyurl.com/lchxblz [10/18/13]

5 - cnn.com/2013/10/09/politics/shutdown-ryan/ [10/9/13]

6 - tinyurl.com/lbp8cxn [10/20/13]

7 - globalpost.com/dispatch/news/regions/americas/united-states/131018/credit-rating-debt-explained [10/20/13]

8 - cbsnews.com/8301-505123_162-57608220/5-reasons-wall-street-thinks-the-next-fiscal-feud-will-fizzle/ [10/19/13]

 image used under Creative Commons license from flickr/401(k) 2013

Bearish Thoughts Persist in a Bull Market

Are memories of the downturn hurting the financial potential of boomers?

 At the end of October, the S&P 500 was up 24.39% in the past 12 months. What investor wouldn’t want gains like that? As uplifting as that market advance was for many, some baby boomers missed out on it. They were simply too afraid to get back into stocks – they couldn’t dispense with their memories of 2008.¹

Would most boomers take a 4% return instead? Earlier this year, the multinational investment firm Allianz surveyed Americans with more than $200,000 in investable assets. Allianz found that for most of these people, protecting retirement savings was financial priority number one. Aversion to risk ran high: 76% of the respondents said that they would prefer an investment vehicle that offered a 4% return with no chance of loss of principal over an investment that offered an 8% return without principal protection.²

In the equity markets, risk and reward are not easily divorced. They come together in an imperfect marriage, a problematic one – but it is one you may need to put up with these days if you are seeking decent yields. With interest rates so minimal, fixed-rate, risk-averse investing can put you at a disadvantage even against mild inflation. If you turn your back on equity investing right now, you could find yourself thwarting your retirement savings potential. 

Psychology froze some boomers out of the Wall Street rebound. The awful stock market slide of 2008-09 left many midlife investors skittish about stocks. As Wall Street history goes, that was an extraordinary, aberrational stretch of market behavior. These events, and the fears that followed, may have scared certain investors away from stocks for years to come. 

What price risk aversion? At the end of the third quarter, more than $8 trillion was sitting in U.S. money market accounts, doing basically nothing. It wasn’t being lost, but it sure wasn’t returning much. In the Allianz survey, 80% of baby boomers polled viewed the stock market as volatile; 38% said that volatility was prompting them to keep some or all of their cash on the sidelines.^2,3 

While all that money isn’t being exposed to risk, it is also bringing investors meager rewards.

Consider the psychology of our society for a moment. Generation after generation is told to save and invest for future objectives, most prominently a comfortable retirement. That need, that purpose, is not going away. As long as that societal need is in place, people are likely predisposed to believe in the potential of equity investing. So there is a collective American psychology – as yet unshaken – that the stock market is a strong option for investing, making money, and building wealth. (The same unshaken assumption remains in the housing market, even after everything homeowners have been through.)

That powerful collective psychology has contributed to the longevity of bull markets – and it isn’t going away. We had the bulk of the federal government shut down for 16 days last month, and yet the S&P 500 gained 4.46% in October. After 10 months of 2013, the index was up 23.16% YTD – and this is a year that has brought fears of a conflagration in the Middle East, the threat of a U.S. credit rating downgrade and a “fiscal cliff,” sequester cuts, a banking crisis in Cyprus that scared the international financial community, and continued high unemployment. Stocks have vaulted past all of it.¹

Consider the view from this wide historical window: in the last 10 years, the S&P 500 has averaged better than a 7% annual return, even with its appalling 47% drop from October 2007 to March 2009. Since 1926, the S&P has a) had 23 years where it returned 10% or better, b) never gone negative over a 20-year period, and c) advanced 8 to 10% a year on average.³

If you bought and held, congratulations. If you opted for tactical asset allocation during the downturn, facing that risk paid off. The point is: you stayed in the market. You didn’t cash out in late 2008 or early 2009 and decide to buy back at the top (as some bearish investors have recently done).  

It isn’t time to throw caution to the wind. The Federal Reserve is not going to keep easing forever; QE3 will eventually end, perhaps early in 2014. When it does, Wall Street will react. The market may price it in, or we may see something worse happen. When you look at all the hurdles this bull market has overcome in the past few years, however, you have to think there is at least a bit more upside to come. Wall Street is optimistic and the performance of stocks certainly demonstrates that optimism, even as bearish thoughts persist.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - money.cnn.com/data/markets/sandp/ [10/31/13]

2 - foxbusiness.com/personal-finance/2013/10/24/wall-streets-rallying-so-why-are-boomers-so-scared/ [10/24/13]

3 - business.time.com/2013/09/27/seeking-shelter-from-stock-swings-savers-take-on-a-different-kind-of-risk/ [9/27/13]

 

SHOULD YOU PAY OFF YOUR HOME BEFORE YOU RETIRE?

Before you make any extra mortgage payments, consider some factors.

Should you own your home free and clear before you retire? At first glance, the answer would seem to be “absolutely, if at all possible.”  Retiring with less debt … isn’t that a good thing? Why not make a few extra mortgage payments to get the job done?

In reality, things are not so cut and dried. There is a fundamental opportunity cost to consider. If you decide to put more money toward your mortgage, what could that money potentially do for you if you were to direct it elsewhere?

In a nutshell, the question is: should you pay down low-interest debt, or should you invest the money into a tax-advantaged account that could potentially bring you a strong return?

Relatively speaking, home loans are cheap debt. Compare the interest rate on your mortgage to the one on your credit card. Should you focus your attention on a debt with 6% interest or a debt with 15% interest?  

You can usually deduct mortgage interest, so if your home loan carries a 6% interest rate, your after-tax borrowing rate could end up being 5% or lower.

If history is any barometer, your home’s value may increase over time and inflation will effectively reduce the real amount of your mortgage over time. 

A Chicago Fed study called mortgage prepayments “the wrong choice”. In 2006, the Federal Reserve Bank of Chicago presented a white paper from three of its economists titled “The Tradeoff between Mortgage Prepayments and Tax-Deferred Retirement Savings”. The study observed that 16% of American households with conventional 30-year home loans were making “discretionary prepayments” on their mortgages each year – that is, payments beyond their regular mortgage obligations. The authors concluded that almost 40% of these borrowers were "making the wrong choice." The white paper argued that the same households could get a mean benefit of 11-17¢ more per dollar by reallocating the money used for those extra mortgage payments into a tax-deferred retirement account.¹

Other possibilities for the money. Let’s talk taxes. You save taxes on each dollar you direct into IRAs, 401(k)s and other tax-deferred investment vehicles. Those invested dollars have the chance for tax-deferred growth. If you are like a lot of people, you may enter a lower tax bracket in retirement, so your taxable income and federal tax rate could be lower when you withdraw the money out of that account.

Another potential benefit of directing more funds toward your 401(k): If the company you work for provides an employer match, then you may be able to collect more of what is often dubbed “free money”.

Let’s turn from tax-deferred retirement investing altogether and consider insurance and college planning. Many families are underinsured and the money for extra mortgage payments could optionally be directed toward long term care insurance or disability coverage. If you’ve only recently started to build a college fund, putting the assets into that fund may be preferable.

Let’s also remember that money you keep outside the mortgage is money that is easier to access. 

What if you owe more than your house is worth? Prepaying an underwater mortgage may seem like folly to you – or maybe you really love the house and are in it for the long run. Even so, you could reallocate money that could be used for the home loan toward an emergency fund, or insurance, or some account with the potential for tax-deferred growth – when all the factors are weighed, it might look like the better move.

Think it over. It really comes down to what you believe. If you are bearish, then you may lean toward paying off your mortgage before you retire. There is no doubt about it - when you pay off debt you owe, you effectively get an instant return on your money for every dollar. If you are tantalizingly close to paying off your house, then you may just want to go ahead and do it because you love being free and clear.

On the other hand, model scenarios may tell you another story. After the numbers are run, you may want to direct the money to other financial priorities and opportunities, especially if you tend to be bullish and think the market will perform along the lines of its long-term historical averages.

No one path is right for everyone. If you’re unsure which direction may be most beneficial to you, speak with a qualified Financial Professional.

Kim Bolker may be reached at 616-942-8600 or kbolker@sigmarep.com.   This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 chicagofed.org/digital_assets/publications/working_papers/2006/wp2006_05.pdf [8/06]

2 montoyaregistry.com/Financial-Market.aspx?financial-market=will-you-have-an-adequate-retirement-cash-flow&category=3 [2/27/11]

Implications of Rising Mortgage Rates

Are they threatening the recovery? Or is their effect overstated?

Between early May and mid-July, the average interest rate on the 30-year fixed-rate mortgage rose about 1%. Rates on 30-year FRMs have basically held steady since hitting a peak of 4.51% in Freddie Mac’s July 11 Primary Mortgage Market Survey – in the August 15 edition, they averaged 4.40% – but they could rise dramatically again.^1,2

When mortgages become a bit costlier, things can get a bit tougher for home buyers, home sellers, home builders, real estate brokers, the construction industry, the labor market, the service industry and the broad economy. As housing’s comeback is a key factor in this current economic recovery, how worried should we be that home loans are growing more expensive?

Analysts are divided about the impact. A July Wall Street Journal poll of economists drew rather mixed opinions: 40.0% of respondents felt that more expensive mortgages “won’t have a noticeable effect” on the housing recovery, 35.6% thought that they “will slow sales” and 24.4% believed that they “will slow home-price gains.”¹

So far, the lure of increasing home values appears to outweigh disappointment over pricier home loans. In the latest S&P/Case-Shiller Home Price Index (released at the end of July and covering the month of May), both the 10-city and 20-city composites showed the biggest year-over-year gain since 2006. Rising home prices (and rising stock prices) contribute greatly to the “wealth effect” felt by consumers. So there is a chance that a 100-basis-point rise in the 10-year Treasury yield (it hit 2.82% on August 15) and conventional mortgage rates may not do as much damage as feared. After all, both consumer confidence and consumer spending have improved even with a 2% hike in payroll taxes and this spring’s federal budget cuts.^3,4,5

Maybe we haven’t seen it yet. The fundamental housing market indicators in our economy are lagging indicators, presenting statistics a month or more old. The Case-Shiller composite home price figures are based on three-month averages ending in the latest month of the index – in other words, the May survey reflected data from March, April and May, and May is when mortgage rates began their ascent.³

New home sales figures compiled by the Census Bureau must also be taken with a grain of salt. The pace of new home sales reached a five-year peak in May, but here is the asterisk: the Census Bureau actually measures new home sales in terms of signed sales contracts rather than closings. So a sizable percentage of those homes were not yet constructed, and the actual closing could have been months away. As it turns out, 36% of the signed sales contracts in May were for homes yet to be built – meaning they were in all probability three to nine months from completion, with most of the involved buyers unable to lock in mortgage rates in early May as they would have preferred.⁶

Which of two outcomes will occur? Summer home sales statistics may reflect more impact from higher mortgage rates. Perhaps they will communicate that the housing market is no longer red-hot, but reasonably healthy. The real estate industry, Wall Street and Main Street can all live with that.   

The bigger question is whether consumer spending and GDP will keep improving as mortgage rates presumably keep rising. If the economy gathers or at least maintains momentum and the “wealth effect” continues to boost consumer morale, then the housing market should see sustained demand – a desirable outcome. If mortgage rates rise due to inflation (or some other factor unrelated to growth), then consumers may decide that costlier mortgages are simply too much of a stumbling block to home buying, gains in home values nonwithstanding.³

Two things can’t be denied. One, consumers have grown more optimistic recently (and wealthier, at least on paper). Two, home loans are still really cheap these days, at least by historical standards. Those two factors may maintain demand in the real estate market in the face of rising interest rates.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - blogs.wsj.com/economics/2013/07/19/will-rising-mortgage-rates-halt-the-housing-rebound/ [7/19/13]

2 - freddiemac.com/pmms [8/15/13]

3 - forbes.com/sites/moneybuilder/2013/08/14/with-mortgage-rates-in-a-holding-pattern-what-will-housing-prices-do/ [8/14/13]

4 - nasdaq.com/article/how-we-know-the-federal-reserve-is-in-control-cm265615 [8/7/13]

5 - usatoday.com/story/money/markets/2013/08/15/stocks-thursday/2658439/ [8/15/13]

6 - realestate.aol.com/blog/2013/06/27/rising-mortgage-rates-impact-homebuilders/ [6/27/13]

What if Fannie & Freddie Went Away?

How might things change for mortgage lenders & borrowers?

 Is a new home financing system ahead? In the text of a speech delivered August 6, President Obama said: “I believe that while our housing system must have a limited government role, private lending should be the backbone of the housing market.” This statement came as part of call for winding down Fannie Mae and Freddie Mac and revamping home financing in America.^1,3

How might the playing field change? Right now, Fannie and Freddie backstop almost 90% of U.S. home loans. They are also $187.5 billion in debt to taxpayers, a result of the 2008 bailout that rescued them from the edge of insolvency. Two measures are already underway in Congress to replace both government-sponsored enterprises within the next few years.^2,3

If a bipartisan bill introduced this spring by Sen. Bob Corker (R-TN) and Mark Warner (D-VA) becomes law, it would transfer lending risk over to private capital. The proposed legislation would require private lenders to assume the first 10% of losses on individual home loans, and stay sufficiently capitalized to counter major losses. A new federal agency – the Federal Mortgage Insurance Corporation, or FMIC – would regulate the mortgage industry and act to insure banks in a crisis. Just how would it be funded? A fee would be assessed on each mortgage issued. In the vision of the bill, the FMIC would pay for itself thanks to those fees and have enough left over to fund the construction of affordable multifamily properties and provide assistance to low-income homebuyers.^2,3,4

Another bill written by House Financial Services Committee chairman Rep. Jeb Hensarling (R-TX) would terminate Fannie Mae and Freddie Mac without a replacement – the FHA would be the last remaining U.S. mortgage backstop. As Bloomberg notes, no House Democrats have emerged to support that bill – and as the Baltimore Sun notes, the bill drafted by Sens. Corker and Warner stands little chance of getting past the House. So it seems the playing field might be reshaped only after considerable compromise, and not in the short term.^2,3

Aren’t Freddie & Fannie turning a profit now? Yes, but none of it is paying for their bailout. The GSEs have now returned more than $131 billion in dividends to the Treasury, but that money represents ROI for Uncle Sam. It doesn’t whittle away the $187.5 billion owed to taxpayers.^3,5    

What would happen to mortgage rates without Fannie & Freddie? They would almost certainly rise. Private lenders have little motivation to finance home loans the way the rules are now, and it would take significant incentives to bring them back into the market. As Moody’s Analytics chief economist Mark Zandi told CNBC, “[That] will mean higher mortgage rates. The question is how much higher.” In particular, first-time or lower-income homebuyers might find it tougher to qualify for a loan. (In one key respect, it has grown tougher: the average credit score for a Fannie and Freddie loan in 2012 was 756, compared to 720 in 2006.)^4,6

Would the 30-year FRM become an endangered species? That is another concern. Without Fannie and Freddie around to guarantee home loans against defaults, the worry is that the standard American mortgage would become scarce. In many other nations, 30-year home loans are unconventional. The fear is that banks would address the default risks of 30-year mortgages by asking for larger down payments and demanding higher interest rates.^2,4

True change will likely take a few years. It is hard to imagine Fannie and Freddie liquidating their portfolios and going out of business soon. Reform will probably proceed gradually – very gradually. President Obama’s call to unwind both GSEs and the recent proposals to replace them certainly amount to interesting food for thought.²

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - cbsnews.com/8301-250_162-57597284/wind-down-fannie-mae-freddie-mac-obama-says/ [8/6/13]

2 - baltimoresun.com/news/opinion/editorial/bs-ed-obama-housing-reform-20130808,0,5392371.story [8/8/13]

3 - sfgate.com/business/bloomberg/article/Obama-Says-Housing-Market-Still-Needs-Limited-4710318.php [8/6/13]

4 - csmonitor.com/Business/new-economy/2013/0808/If-Obama-eliminates-Fannie-Mae-Freddie-Mac-will-mortgage-rates-go-up [8/8/13]

5 - reuters.com/article/2013/08/08/us-usa-fanniemae-results-idUSBRE9770JL20130808 [8/8/13]

6 - tinyurl.com/mg2xxs4 [8/7/13]

How Impatience Hurts Retirement Saving

Keep calm & carry on – it may be good for your portfolio.

 Why do so many retirement savers underperform the market? From 1993-2012, the S&P 500 achieved a (compound) annual return of 8.2%. Across the same period, the average investor in U.S. stock funds got only a 4.3% return. What accounts for the difference?^1,2

One big factor is impatience. It is expressed in emotional investment decisions. Too many people trade themselves into mediocrity – they react to the headlines of the moment, buy high and sell low. Dalbar, the noted investing research firm, estimates this accounts for 2.0% of the above-mentioned 3.9% difference. (It attributes another 1.3% of the gap to mutual fund operating costs and the remaining 0.6% to portfolio turnover within funds.)²

Impatience encourages market timing. Some investors consider “buy and hold” passé, but it has certainly worked well since 2009. How did market timing work in comparison? Citing Investment Company Institute calculations of equity fund asset inflows and outflows from January 2007 to August 2012, U.S. News & World Report notes that it didn’t work very well. During that stretch, mutual fund investors either sold market declines or bought after market ascents 57.4% of the time. In addition, while the total return of the S&P 500 (i.e., including dividends) was -0.13% in this time frame, equity mutual fund investors lost 35.8% (adjusted for dividends). ³

Most of us don’t “buy and hold” for very long. Dalbar’s latest report notes that the average equity fund investor owned his or her shares for 3.3 years during 1993-2012. Investors in balanced funds (a mix of stocks and bonds), held on a bit longer, an average of about 4.5 years. They didn’t come out any better – the report notes that while the Barclays Aggregate Bond Index notched a 6.3% annual return over the 20-year period studied, the average balanced fund investor’s annual return was only 2.3% .²

What’s the takeaway here for retirement savers? This amounts to a decent argument for dollar cost averaging – the slow and steady investment method by which you buy shares over time, a little at a time. When the market sinks, you are buying more shares as they have become cheaper – meaning you will own more (quality) shares when they regain value.

It also shows you the value of thinking long-term. When you save for retirement, you are saving with a time horizon in mind. A distant horizon. Consistent saving from a (relatively) early age and the power of compounding can potentially have much greater effect on the outcome of your retirement savings effort than investment selection.

Keep your eyes on your long-term retirement planning objectives, not the short-term volatility highlighted in the headlines of the moment.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - finance.yahoo.com/news/p-fund-tops-p-500-142700129.html [5/3/13]

2 - marketwatch.com/story/7-reasons-why-retirement-savers-fail-2013-06-26 [6/26/13]

3 - money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/11/05/herd-behavior-hurts-fund-investors [11/5/12]

Has “Sell in May” Gone Away?

Investors aren’t yet backing out of stocks this spring.

 Healthy skepticism hasn’t motivated much selling. An old belief has lingered on Wall Street for years – the belief that investors should get out of stocks in May and get back into stocks in October. But here we are in May – and while analysts are wondering how much more upward progress stocks can make, gains are still occurring. On May 9, the S&P 500 closed at  1,626.67 – up 1.82% so far for the month after going +1.81% for April.¹ 

A May retreat is hardly a given. You can readily find articles questioning the current rally, insisting a pullback is ahead. After all, didn’t stocks swoon in spring 2010 and spring 2011? Wasn’t last spring just an aberration?

The selloffs of spring 2010 and spring 2011 weren’t really prompted by seasonal behavior. You had the EU debt crisis, the twin calamities hitting Japan, and the debt ceiling fight (and the resulting U.S. credit rating downgrade) occurring. By contrast, across May-September 2012 the S&P 500 rose more than 4%.²      

Going back decades, the case for selling in May appears just as inconclusive. During 1965-1984, the S&P lost ground 15 times in May – but that 20-year stretch included a 16-year secular bear market. From 1985-1997, the S&P 500 never had a down May.^2,3

Conditions could support further gains. Earnings are sometimes called the mother’s milk of stocks, and we’ve seen about 5% Q1 earnings growth. The Fed is still purchasing $85 billion of Treasuries and mortgage-backed securities per month. Hiring has picked up. Consumer prices are barely rising. Money is regularly flowing into stock-based mutual funds this year for the first time since the market downturn of 2008.^4,5

Beyond these factors, there is still enough optimism on Wall Street to counter skepticism. If the current bull market is getting long in the tooth, few see a bear market quickly emerging.

As CNBC.com recently noted, Morgan Stanley chief investment strategist David Darst maintains an informal 6-point bear market “checklist” – and Darst sees none of the six bearish signals currently flashing (Fed tightening, recession looming, bond spreads widening, evident investor euphoria, stretched stock price valuations, retreat in small caps + transportation + bank stocks). While the Fed’s easing may be fueling the rally more than anything else, QE3 is still continuing undiminished.⁵

The “sell in May” idea actually emerged in Great Britain, not America. Years ago, London brokers would go on holiday in May and head back to their desks in September, resulting in thin trading and subdued returns in the interim. Supposedly, this was how the “sell in May” pattern originated, and it may not even apply in Great Britain anymore: investors selling the Dow Jones STOXX 600 in May and buying back in for September would have lost money in three of the five years from 2008-12.⁶

Kim Bolker may be reached at 616-942-8600 or kbolker@sigmarep.com  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - money.cnn.com/data/markets/sandp/ [5/9/13]

2 - dailyfinance.com/on/sell-may-investing-stock-market/ [5/3/13]

3 - forbes.com/sites/greatspeculations/2010/03/11/secular-bear-market-reaches-10th-anniversary/ [3/11/10]

4 - cnbc.com/id/100723658 [5/9/13]

5 - cnbc.com/id/100720862 [5/8/13]

6 - reuters.com/article/2013/05/07/us-markets-stocks-seasonals-idUSBRE9460IT20130507 [5/7/13]

When a Family Member Dies

A financial checklist for the most difficult of times.  

The passing of a loved one irrevocably alters family life. After a death, there is so much to attend to that addressing financial matters related to a family member’s passing may be put on hold. This should be done, though, and it is better to do it sooner rather than later. Here, then, is a list of what commonly needs to be looked after.

Request copies of the death certificate. Depending on where you live, you have two or three places to turn to for this document. You can phone, email or personally visit the office of the county recorder (or county clerk, as the term may be). You can alternately contact your state’s vital records department (sometimes called the state registrar or department of health), though it may take a little longer to get the document this way. In addition, some large and mid-sized cities maintain their own registrars of births and deaths.

Call advisors, executors & business partners as applicable. The deceased’s lawyer and CPA should be quickly notified, along with any business partners and the executor of his or her estate. You must have a say in the decision-making that follows. The goals of protecting family assets, carrying out your loved one’s bequests, and determining the next steps for a business will follow.  

Call your loved one’s current or former employer(s). Notify them even if he or she left the work force years ago, as retirement savings or pension payments may be involved. As the conversation develops, it is perfectly appropriate to ask about pertinent financial matters – say, 401(k) or 403(b) savings that will be inherited by a beneficiary or what will happen to unused vacation time and/or unpaid bonuses.

Funds amassed in a qualified retirement plan sponsored by an employer (or an IRA, for that matter) commonly go to the primary beneficiary who has been named on the most recent beneficiary form filled out by the account owner. That sounds simple enough – but certain rules and regulations can make things complicated.¹

As a general rule, if the late 401(k) or 403(b) account owner was your spouse, then you are the presumed beneficiary of the 401(k) or 403(b) assets. Under the Employee Retirement Income Security Act (ERISA), workplace retirement plans are directed to abide by this guideline. If someone else has been named as the primary beneficiary of the account with your consent, then the assets will go that person.¹

If the late 401(k) or 403(b) account owner was single, the assets in the account will go to whoever is designated as the primary beneficiary. The beneficiary designation will override any wishes stated in a will (for the record, the Supreme Court ruled so in 2009).¹

To arrange and confirm the transfer or distribution of such assets, the beneficiary form must be found. If you can’t locate it, the employer and/or the financial firm overseeing the retirement plan should provide access to a copy. The financial firm should ask you to supply:

*A certified copy of the account owner's death certificate

*A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)

If the named beneficiary of the retirement plan assets is a minor, his or her birth certificate will be requested. If the named beneficiary is a trust, the financial firm will want to see a W-9 form and a copy of the trust agreement.² 

As to what to do with the retirement plan assets, there are really only three courses of action: you can a) transfer the assets into an IRA, b) transfer them into an IRA you own if the account owner was your spouse, or c) take the assets as a lump sum and pay the resulting income tax on that money, with the possibility of moving into a higher tax bracket.²

The value of these assets will be included in the estate of the deceased, unless the named beneficiary is a spouse or a charity.³

If you have been widowed, call Social Security. If you already receive benefits, you may now be eligible for greater benefits.

If your spouse received Social Security and you did not, you may now qualify for survivors benefits – and you should let Social Security know as soon as possible, as these benefits may be paid out relative to your application date rather than the date of your loved one’s death.

If this is the case, you may apply for survivors benefits by phone or by visiting a Social Security office. You will need to have some extensive paperwork on hand, specifically:

*Proof of the death (death certificate, funeral home documentation)

*Your late spouse’s Social Security #

*His/her most recent W-2 forms or federal self-employment tax return

*Your own Social Security # & birth certificate

*Social Security #s & birth certificates of any dependent children

*Your marriage certificate or divorce papers, as relevant

*The name of your bank & the number of your bank account for direct deposit purposes

If you have reached full retirement age, you will likely get 100% of the basic benefit amount that your late spouse was receiving. If you are in your sixties but haven’t yet reached full retirement age, you may receive anywhere from 71-99% of that amount. If you have a child younger than 16, you will get 75% of your late spouse’s basic benefit amount and so will your child.⁴

Call the insurance company. Assuming your loved one had some form of life insurance, contact the policyholder services department of that insurer and confirm the steps for claiming the death benefit. A claimant’s statement will have to be filled out, signed and presented to the insurance company (one for each named beneficiary of the policy), and a certified copy of the death certificate must be attached to said statement(s). Some insurers also want you to fill out a W-9 form, which tells the IRS about any interest paid on the value of the policy.⁵

Death benefits are generally paid out within days of a claim. Presumably, they will be paid out in a lump sum. If that is the case, they won’t be taxable. Occasionally, insurers will allow the beneficiary to receive the payout as a stream of monthly income.⁵

It isn’t unusual for people to own multiple life insurance policies. The AARP, AAA and myriad banks and non-profits market group life coverage to members/customers, and mortgage lenders and credit issuers offer forms of life insurance for borrowers. Tracking all of this coverage down is the problem, and canceled checks and bank records don’t always provide ready clues. Not surprisingly, companies have appeared that will help you search for obscure life insurance policies (for a fee, of course), and you should be able to locate these businesses through your state insurance department.⁵

If the family member was a veteran, call the VA. Your family may be entitled to funeral and burial benefits. In addition, the Veterans Administration offers Death Pensions and Aid & Attendance and Housebound Pensions to lower-income widows of deceased wartime veterans and their unmarried children.

These pensions are needs-based. To be eligible for the Death Pension, a widow or child’s “countable” income must fall below a certain yearly limit set by Congress. (A “child” as old as 22 may be eligible for the Death Pension.) The deceased veteran must not have received a dishonorable discharge, and he or she must have served 90 or more days of active duty, at least 1 day of it during wartime. If he or she entered active duty after September 7, 1980, then in most cases 24 months or more of active duty service are necessary for a Death Pension to eventually be paid. The Aid & Attendance and Housebound Pensions provide some recurring income to pay for licensed home health aide or homemaker services.⁶

It is wise to contact a Veterans Services Officer before you file such a pension claim, as he or she can be a big help during the process. You can find a VSO through your state veterans’ affairs department of or through the VFW, the Order of the Purple Heart, the American Legion or the non-profit National Veterans Foundation.⁶

A final individual income tax return may be required for the deceased. You or your tax advisor should consult IRS Publication 17 for more detail. Also, search for “Topic 356 - Decedents” on the IRS website. Deductible expenses paid by the deceased before death can generally be claimed as deductions on such a return.⁷   

If you have been widowed, consider the future. In the coming days or weeks, you should arrange a meeting to review your retirement planning strategy, and your will, beneficiary designations and estate plan may also need to be updated. The passing of your spouse may necessitate a new executor for your own estate. Any durable powers of attorney may also need to be revised.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - online.wsj.com/article/SB10001424053111904007304576496612749922654.html [9/7/11]

2 - www.schwab.com/public/file/P-1625576/CS13416-02_MKT13598-10_FINAL_118091.pdf [12/10]

3 - www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/planning_with_retirement_benefits.html [2/11/13]

4 - www.ssa.gov/pubs/10084.html#a0=2 [2/11/13]

5 - www.360financialliteracy.org/Topics/Insurance/Life-Insurance/Claiming-Life-Insurance-Benefits [3/20/13]

6 - nvf.org/death-pension [3/20/13]

7 - www.irs.gov/taxtopics/tc356.html [1/29/13]

Putting Your Tax Refund to Work

Where could that money go besides a bank account?

Should your refund be saved? According to a TD Ameritrade poll, 47% of U.S. taxpayers expect a refund this year. What do they plan to do with the money?¹

The answers may surprise you. While 15% of the survey respondents indicated they would spend their refunds on discretionary purchases, 47% said they would save the money and 44% indicated they would use some or all of it to whittle away some debt. Just 15% said they would invest it, and only 6% said they would direct it to a charity.¹

Besides deposit accounts, consider other destinations. Putting your refund into your savings or checking account is sensible enough – but with the interest rates most bank accounts earn today, you may be wondering about alternatives. Here are some other options.

Your refund could let you put more money into your workplace retirement plan. Does your employer offer to match your retirement plan contributions? If so, you might want to think about contacting your plan administrator or human resources officer and increasing your elective salary deferrals into the retirement plan this year by the same amount as the refund. If you deposit those refund dollars in a checking or savings account, you can offset the increase in the amount of salary you defer by distributing the refund dollars from the bank account to yourself. Hopefully, that checking or savings account generates at least some interest on those deposited funds as well.²

It could help you increase your 2012 (or 2013) IRA contribution. If you didn’t make the maximum allowable IRA contribution for 2012 – $5,000 across all of your traditional and Roth IRAs, $6,000 for those 50 or older – you could boost that contribution as a byproduct of your refund.²

Assuming you haven’t sent your 2012 federal return to the IRS yet, you can redo your taxes to show your 2012 IRA contribution(s) raised by the amount of the refund you will be getting. As the deadline for 2012 contributions is April 15, 2013, you could either make your additional 2012 IRA contribution using your refund (if you file early and get your refund back nice and early) or with equivalent cash from your savings or checking account, knowing that you will then use the refund to reimburse yourself. Whatever way you choose, please make sure that you earmark your additional contribution for the year 2012; otherwise, the IRA custodian will interpret it as a contribution for this year. (If you’ve already sent your 2012 taxes to the IRS, you could still pull this off with the help of a 1040X form to amend your return).²

Another option: use the refund you get from your 2012 taxes to increase your 2013 IRA contribution.

You could tell the IRS to put the money in bonds. Starting in 2011, the IRS gave taxpayers who received refunds a third option: in addition to a direct deposit or a check in the mail, their refunds could be redirected into U.S. Series I Savings Bonds. Up to $5,000 of refund dollars can be invested this way (in multiples of $50).³

You could use the dollars for home improvement. If you want to go green (or even greener) and you have the time, initiative and patience to tackle an energy-efficient home improvement project, here is another option. You could get as much as a $500 tax credit for your effort.² 

You could make an additional mortgage payment or pay property tax. Assuming your home isn’t underwater, you may want to use the refund dollars to reduce mortgage principal. Also, mortgage companies often keep a few thousand bucks in escrow to pay various tax and insurance expenses linked to your home, and some of them will actually let a borrower’s savings account stand in for their escrow account. If they permit, you could make such payments out of an account of your own while it earns a (tiny) bit of interest.²

Lastly, think about avoiding a refund in 2013. In figurative terms, your federal tax refund amounts to an interest-free loan to Uncle Sam. If you don’t particularly want to make that “loan” again, see if your W-4 can be tweaked to decrease that possibility this year.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 – files.shareholder.com/downloads/AMTD/2319508826x0x633008/9024d25b-97d6-410e-bc67-f7e1bcf7f17c/Tax_Refund_Release_Final_2013.pdf [2/6/13]

2 – www.cnbc.com/id/100457342 [2/13/13]

3 – www.irs.gov/uac/Ten-Things-to-Know-About-Tax-Refunds [4/11/13]

Common Deductions Taxpayers Overlook

Make sure you give them a look as you prepare your 1040. 

Every year, taxpayers leave money on the table. They don’t mean to, but as a result of oversight, they miss some great chances for federal income tax deductions.

While the IRS has occasionally fixed taxpayer mistakes in the past for taxpayer benefit (as was the case when some filers ignored the Making Work Pay Credit), you can’t count on such benevolence. As a reminder, here are some potential tax breaks that often go unnoticed – and this is by no means the whole list.

Expenses related to a job search. Did you find a new job in the same line of work in 2012? If you itemize, you can deduct the job-hunting costs as miscellaneous expenses. The deductions can’t surpass 2% of your adjusted gross income. Even if you didn’t land a new job in 2012, you can still write off qualified job search expenses. Many expenses qualify: overnight lodging, mileage, cab fares, resume printing, headhunter fees and more. Didn’t keep track of these expenses? You and your CPA can estimate them. If your new job prompted you to relocate 50 or more miles from your previous residence in 2012, you can take a deduction for job-related moving expenses even if you don’t itemize.¹ 

Home office expenses. Do you work from home? If so, first figure out what percentage of the square footage in your house is used for work-related activities. (Bathrooms and other “break areas” can count in the calculation.) If you use 15% of your home’s square footage for business, then 15% of your homeowners insurance, home maintenance costs, utility bills, ISP bills, property tax and mortgage/rent may be deducted.² 

Health insurance & Medicare costs. About 7% of us pay health coverage costs out of pocket. If you are in that 7%, you may write off 100% of your premiums as an adjustment to your business income per the Small Business Jobs Act of 2010. That write-off privilege extends to you, your spouse and 100% of your dependents.^2,3

Some small business owners have qualified for Medicare. If you are one of them, and you and/or your spouse aren’t eligible for coverage under an employer-subsidized health plan, then you may deduct premiums paid for Medicare Part B, Medicare Part D and Medigap policies. You don’t have to itemize to get this deduction, and the 7.5%-of-AGI test for itemized medical costs isn’t relevant to this.¹ 

State sales taxes. If you live in a state that collects no income tax from its residents, you have the option to deduct state sales taxes paid in 2012 per the fiscal cliff bill passed into law on January 2.¹  

Student loan interest paid by parents. Did you happen to make student loan payments on behalf of your son or daughter in 2012? If so (and if you can’t claim your son or daughter as a dependent), that child may be able to write off up to $2,500 of student-loan interest. Itemizing the deduction isn’t necessary.¹  

Education & training expenses. Did you take any classes related to your career in 2012? How about courses that added value to your business or potentially increased your employability? You can deduct the tuition paid and the related textbook and travel costs. Even certain periodical subscriptions may qualify for such deductions.² 

Eating out on business. The cost of a business lunch, breakfast or dinner – or a lunch, breakfast or dinner associated with business development – qualifies for an itemized deduction.² 

Those small charitable contributions. We all seem to make out-of-pocket charitable donations, and we can fully deduct them (although few of us ask for receipts needed to itemize them). However, we can also itemize expenses incurred in the course of charitable work (i.e., volunteering at a toy drive, soup kitchen, relief effort, etc.) and mileage accumulated in such efforts ($0.14 per mile for 2012, and tolls and parking fees qualify as well).¹ 

Superstorm Sandy losses. The IRS allows filers living in federally declared disaster areas to file casualty claims for the year in which the disaster occurred, and the flexibility to amend the previous year’s return. This means that you can deduct 2012 casualty losses on either your 2011 or 2012 federal tax return.⁴ 

Armed forces reserve travel expenses. Are you a reservist or a member of the National Guard? Did you travel more than 100 miles from home and spend one or more nights away from home to drill or attend meetings? If that is the case, you may write off 100% of related lodging costs and 50% of meal costs  and take a 2012 mileage deduction ($0.555 per mile plus tolls and parking fees).¹ 

Estate tax on income in respect of a decedent. Have you inherited an IRA? Was the estate of the original IRA owner large enough to be subject to federal estate tax? If so, you have the option to claim a federal income tax write-off for the amount of the estate tax paid on those inherited IRA assets. If you inherited a $100,000 IRA that was part of the original IRA owner’s taxable estate and thereby hit with $35,000 in death taxes, you can deduct that $35,000 on Schedule A as you withdraw that $100,000 from the inherited IRA, $17,500 on Schedule A as you withdraw $50,000 from the inherited IRA, and so on. If you withdrew such inherited assets in 2012, you have the opportunity to claim the appropriate deduction for the 2012 tax year.¹ 

And now, some opportunities for quasi-deductions that often go overlooked... 

The child care credit. If you paid for child care while you worked in 2012, you can qualify for a tax credit worth 20-35% of that amount. (The child, or children, must be no older than 12.) Tax credits are superior to tax deductions, as they cut your tax bill dollar-for-dollar.¹  

Parents as dependents. If you have parents whose taxable incomes are underneath the $3,800 personal exemption for 2012 and you pay more than half of their support, they might qualify as dependents on your federal return even if they live at a different address.⁴ 

Filing status shifts. Are you a single filer? Do you have a relative or one or more children who qualifies as a dependent? If so, you could change your filing status to head of household, which could save you some tax dollars.⁴ 

Reinvested dividends. If your mutual fund dividends are routinely used to purchase further shares, don’t forget that this incrementally increases your tax basis in the fund. If you do forget to include the reinvested dividends in your basis, you leave yourself open for a double hit – your dividends will be taxed once at payout and immediate reinvestment, and then taxed again at some future point when they are counted as proceeds of sale. Remember that as your basis in the fund grows, the taxable capital gain when you redeem shares will be reduced. (Or if the fund is a loser, the tax-saving loss is increased.)¹

As a precaution, check with your tax professional before claiming the above deductions on your federal income tax return.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 – www.kiplinger.com/article/taxes/T054-C000-S001-the-most-overlooked-tax-deductions.html [1/3/13]

2 – money.msn.com/tax-tips/post.aspx?post=382d5150-a740-4f31-b091-4711dc07bafc [1/18/13]

3 – vaperforms.virginia.gov/indicators/healthfamily/healthInsurance.php [1/23/13]

4 – www.cnbc.com/id/100400925 [1/23/13]

Bad Money Habits to Break in 2013

Behaviors worth changing for the New Year.      

Do bad money habits constrain your financial progress? Many people fall into the same financial behavior patterns year after year. If you sometimes succumb to these financial tendencies, the New Year is as good an occasion as any to alter your behavior.

#1: Lending money to family & friends. You may know someone who has lent a few thousand to a sister or brother, a few hundred to an old buddy, and so on. Generosity is a virtue, but personal loans can easily transform into personal financial losses for the lender. If you must loan money to a friend or family member, mention that you will charge interest and set a repayment plan with deadlines. Better yet, don’t do it at all. If your friends or relatives can’t learn to budget, why should you bail them out?

#2: Spending more than you make. Living beyond your means, living on margin, whatever you wish to call it, it is a path toward significant debt. Wealth is seldom made by buying possessions. Today’s flashy material items may become the garage sale junk of 2025. Yet, the trend continues: a 2012 Federal Reserve Survey of Consumer Finances calculated that just 52% of American households earn more money than they spend.¹

#3: Saving little or nothing. Good savers build emergency funds, have money to invest and compound, and leave the stress of living paycheck-to-paycheck behind. If you can’t put extra money away, there is another way to get some: a second job. Even working 15-20 hours more per week could make a big difference. The problem is far too common: a CreditDonkey.com survey of 1,105 households last fall found that 41% of respondents had less than $500 in savings. In another disturbing detail, 54% of the respondents had no savings strategy.²

#4: Living without a budget. You may make enough money that you don’t feel you need to budget. In truth, few of us are really that wealthy. In calculating a budget, you may find opportunities for savings and detect wasteful spending. 

#5: Frivolous spending. Advertisers can make us feel as if we have sudden needs; needs we must respond to, needs that can only be met via the purchase of a product. See their ploys for what they are. Think twice before spending impulsively.  

#6: Not using cash often enough. No one can deny that the world runs on credit, but that doesn’t mean your household should. Pay with cash as often as your budget allows.

#7: Gambling. Remember when people had to go to Atlantic City or Nevada to play blackjack or slots? Today, behemoth casinos are as common as major airports; most metro areas seem to have one or be within an hour’s drive of one. If you don’t like smoke and crowds, you can always play the lottery. There are many glamorous ways to lose money while having “fun”. The bottom line: losing money is not fun. All it takes is willpower to stop gambling. If an addiction has overruled your willpower, seek help.

#8: Inadequate financial literacy. Is the financial world boring? To many people, it is. The Wall Street Journal is not exactly Rolling Stone, and The Economist is hardly light reading. You don’t have to start there, however: great, readable and even entertaining websites filled with useful financial information abound. Reading an article per day on these websites could help you greatly increase your financial understanding if you feel it is lacking.

#9: Not contributing to IRAs or workplace retirement plans. Even with all the complaints about 401(k)s and the low annual limits on traditional and Roth IRA contributions, these retirement savings vehicles offer you remarkable wealth-building opportunities. The earlier you contribute to them, the better; the more you contribute to them, the more compounding of those invested assets you may potentially realize.  

#10: DIY retirement planning. Those who plan for retirement without the help of professionals leave themselves open to abrupt, emotional investing mistakes and tax and estate planning oversights. Another common tendency is to vastly underestimate the amount of money needed for the future. Few people have the time to amass the knowledge and skill set possessed by a financial services professional with years of experience. Instead of flirting with trial and error, see a professional for insight.

Kim Bolker may be reached at kbolker@sigmarep.com and 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 not a solicitation or a 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 – business.time.com/2012/10/23/is-the-u-s-waging-a-war-on-savers/ [10/23/12]

2 - www.creditdonkey.com/no-emergency-savings.html [10/9/12]

Audit Red Flags

What raises eyebrows at the IRS?  

Are you one of those taxpayers worried about being audited? The fear may be overblown – according to Internal Revenue Service data, just 1.6 million taxpayers were audited in 2011. The agency reviewed about 1% of returns sent in by taxpayers making less than $200,000, and no more than 12% of millionaires had their returns scrutinized.^1,2 

Still, no one likes extra stress courtesy of the IRS. Self-employed individuals seem to be magnets for audits – in fact, IRS data indicates that people who work for themselves and earn from $100,000-$200,000 yearly are five times more likely to get a second look from the agency than the typical employee.¹ 

Let’s look at some red flags that might get you extra IRS scrutiny. (We’ll end on a positive note – you or someone you know might be eligible for an unexpected federal tax refund from 2008.) 

A Schedule C that hints at some odd bookkeeping. Schedule Cs get a close look annually as the IRS seeks to remedy the tax gap (the difference between federal taxes owed and federal taxes paid). As Schedule Cs are often filled out by solopreneurs and small business owners themselves, the chances increase for claiming substantial deductions that may be hard to substantiate.¹

Taxable income of $1 million or more. Millionaires work with accountants for a reason – generally speaking, returns prepared by tax professionals raise far fewer red flags than DIY ones. If you will make around $1 million this year, look back at the first paragraph of this article and consider whether or not it might be wise to defer some potentially taxable income into 2013.¹

Bad math. Calculators are readily available and they can be as crucial as software when it comes to filing your federal return. The IRS does spot mediocre mathematics in returns. It has even recalculated taxes to save people money in years when special tax credits were available, such as the Making Work Pay credit. However, it also finds unreported and underreported taxable income through the same scrutiny. In fact, the IRS found 4.2 million math errors last year on tax returns for 2010.^1,2

Huge deductions. Is your money-losing small business venture truthfully just a hobby? Did you really donate $4,000 worth of office supplies to a charity, and do you have the receipts to back that up? The IRS routinely checks returns for deductions that seem outlandish.¹

Living large. Does the IRS peruse social media? Yes it does, just as many people do. The IRS has done good detective work for years; its investigators know to check out DMV and employment records to get a better picture of an errant taxpayer. Today, photos and posts on Facebook and MySpace and Twitter can telegraph potentially valuable nuggets of information, particularly about young taxpayers who have come into wealth that their returns don’t seem to show.¹

If you’re reading this, you’re paying more attention than many others. That claim really isn’t so grandiose – a staggering number of Americans pay scant attention to their federal taxes. According to the 2012 Taxes and Savings Survey from Capital One Bank, 11% of American taxpayers choose to file at the last minute. For that matter, about 5% of Americans (that’s 7 million people) don’t file federal returns at all – and in some cases, it isn’t just because they don’t earn enough taxable income.²

P.S.: you or someone you know might be eligible for some money. The IRS has more than $1 billion in unclaimed refunds just waiting for U.S. taxpayers who didn’t send in federal tax returns for the year 2008. The IRS estimates that the median such refund is $637. Are you or someone you know eligible? Visit this webpage for more information: www.irs.gov/newsroom/article/0,,id=254725,00.html. If you are eligible, you must file a 2008 federal return (and put it in the mail) ASAP – the deadline is April 17, 2012.³

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 not a solicitation or a 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 - www.smartmoney.com/taxes/income/5-ways-to-avoid-an-irs-audit-1328740306206/ [2/10/12]

2 - www.foxbusiness.com/personal-finance/2012/04/13/5-last-minute-tax-mistakes/ [4/13/12]

3 - www.irs.gov/newsroom/article/0,,id=254725,00.html [2/23/12]

Social Security Claiming Strategies

What can married couples do to increase joint lifetime benefits?

What is your “magic number”? Roughly half of retirees claim Social Security benefits at age 62, as soon as they become eligible. Some people delay benefits and postpone using their retirement savings as an income source. Others apply out of necessity; their financial situation leaves them little choice.¹  

These factors aside, what if you have a choice? If you wait a few years to apply for Social Security, how much more income might you realize?  

Could you wait until age 66? The Social Security Administration has made 66 the “full” retirement age for people born during 1943-1954. If you were born in this period and you apply for Social Security at age 62, you will reduce your retirement benefit by 25% and your spouse’s by 30%.^2,3  

That alone might convince you to wait. In addition, there are claiming strategies that may bring spouses much greater cumulative lifetime Social Security income, and they depend on one spouse waiting until age 66 to apply for benefits.  

That may be the time for a file & suspend strategy. This tactic positions a married couple to receive maximum Social Security benefits at age 70, with one spouse being able to claim some benefits at age 66. 

An example: Terry was born in 1947 and Teresa was born in 1951, so full retirement age is 66 for both of them. Terry files his claim for Social Security benefits at age 66, but then he elects to suspend his $2,000 monthly retirement benefit. Doing that clears the way for Teresa to get a $1,000 monthly spousal benefit when she reaches 66; she can do this by filing a restricted claim for spousal benefits only at that time.⁴ 

So while some spousal benefits are rolling in, Terry and Teresa have both elected to put off receiving their own Social Security benefits until age 70. That allows each of them to rack up delayed retirement credits (8% annually) between 66-70. So when Terry turns 70, he is eligible to collect an enhanced benefit: $2,640 per month instead of the $2,000 per month he would have received at age 66. At 70, Teresa can switch from receiving the $1,000 monthly spousal benefit to collecting her enhanced benefits.^1,4 

Variations on file & suspend. There are other ways to do this. For example, 66-year-old Terry could initially apply for Teresa’s spousal benefits as Teresa applies for her own benefits at 62. Terry thereby gets $800 a month while Teresa receives her own reduced benefit of $1,200 a month. At 70, Terry foregoes getting the spousal benefit and switches to receiving his own enhanced benefit ($2,640 a month thanks to those delayed retirement credits). If Terry lives to age 83 and Teresa lives to age 90, their total lifetime Social Security benefits will be $1,043,520 under this strategy, as opposed to $840,600 if they each apply for benefits when they turn 62.¹ 

Widows can also use a variant on the file-and-suspend approach. As an example, Fran is set to receive $1,400 monthly from Social Security at age 66. Her husband dies when she is 60. She can get a widow’s benefit of $1,430 at 60, but instead she claims her own reduced benefit of $1,050 at age 62, then switches to a widow's benefit of $2,000 at 66 (her husband would have received $2,000 monthly at age 66). By doing this, she positions herself to collect $112,000 more in lifetime benefits.¹ 

Postponement can also be used to enlarge survivor benefits. Let’s go back to Terry and Teresa: if they each start getting Social Security at 62, Teresa is looking at a $1,650 monthly survivor benefit if Bob passes away. But if Terry waits until 66 to claim his benefits, Teresa’s monthly survivor benefit would be $2,640.¹ 

Details to note. The file-and-suspend strategy is only allowable if one spouse has reached full retirement age. In order for you to claim a spousal benefit, your husband or wife has to be getting Social Security benefits. Applying for Social Security before full retirement age with the idea that your spouse can collect spousal benefits at 62 has a drawback: you are reducing both of your lifetime retirement benefits.⁵ 

Only 29% of respondents in a 2012 AARP survey knew that waiting until age 70 to apply for Social Security would bring them their maximum monthly benefit. Congratulate yourself for being in that group, and consider the long-range financial merits of claiming your benefits years after age 62.⁶

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 - www.smartmoney.com/retirement/planning/strategies-to-max-out-social-security-benefits-1329243329517/ [3/2/12]

2 – www.ssa.gov/retire2/retirechart.htm [11/15/12]

3 – www.ssa.gov/retire2/agereduction.htm [11/15/12]

4 - www.investmentnews.com/article/20121105/BLOG05/121109984 [11/5/12]

5 - www.nextavenue.org/article/2012-08/how-avoid-making-social-security-mistakes [8/6/12]

6 - www.aarp.org/about-aarp/press-center/info-02-2012/new-aarp-survey-shows-many-unaware-of-social-security-claiming-strategies.html [2/29/12]

The big tax questions of 2013

How will Congress resolve these issues? 

Decisions must be made. In the next couple of months, Congress will address several major tax matters. Here are the big questions looming. 

The Bush-era income tax cuts. Will the current 10%-15%-25%-28%-33%-35% federal tax rate structure give way to 15%-28%-31%-36%-39.6% tax brackets in 2013? After the election, some analysts feel a compromise will be struck to maintain some of the Bush-era cuts for another year. In 2013, you may see the 10%, 15%, 25% and 28% brackets being retained while the wealthy face higher taxes.¹ 

Tax rates on capital gains & dividends. Right now, dividends and most long-term capital gains are taxed at either 0% or 15% (depending on the income tax bracket you fall into). In 2013, dividends are scheduled to be taxed as regular income (cf. 15%-39.6% tax brackets above) and the capital gains tax rates are set to increase to 10% and 20%. So will dividend taxes and capital gains taxes only increase for the rich in 2013? That may very well turn out to be the case.²  

Estate & gift taxes. President Obama’s proposal has the U.S. returning to a top estate tax rate of 45% with a $3.5 million exemption. In other words, estate taxes would return to 2009 levels as opposed to 2001 levels (55% top rate, $1 million exemption), which is what would happen if the Bush-era cuts simply expired. While Sen. Orrin Hatch (R-UT) and others in Congress have called for an end to estate taxes, many analysts think they will return to 2009 levels as a byproduct of Obama’s re-election. Will we see a unified gift and estate tax in 2013? That is a possibility, though not a given. It could be that the lifetime gift tax exemption becomes $3.5 million in 2013 (it is currently $5.12 million per individual with the unused portion of an individual exemption portable between spouses) with gifts past the exemption taxed at 35%. That would be better than the alternative: a scheduled $1 million exemption, along with a 55% maximum gift tax rate.^2,3     

The payroll tax holiday. Months ago, the consensus was that this would not survive into 2013. Yet last month, Rep. Christopher Van Hollen, the top Democrat on the House Budget Committee, told C-SPAN that it should be extended. Former Treasury Secretary and Obama administration economic advisor Larry Summers agrees. So it may live on for another year.⁴    

The marriage penalty. Our federal tax code has a longstanding quirk: occasionally, married couples pay more in tax than they would if they were single filers. The Economic Growth and Tax Relief Reconciliation Act of 2001 attempted to lessen the penalty in two ways. It made the standard deduction for married joint-filing couples twice what it was for singles, and it made the bottom two tax brackets for those married and filing jointly twice as broad as for singles. In 2013, the marriage penalty could become more severe: the standard deduction for joint filers will be only about 167% of the standard deduction for singles and those widened joint-filer tax brackets are slated to narrow. As middle-income couples will probably face higher payroll taxes in 2013, retaining the current softer penalty seems likely.² 

Child & childcare tax credits. Both of these credits are set to shrink next year. The child tax credit is supposed to be halved to $500, and the maximum childcare credits available to most parents ($600 for one child aged 12 or younger, $1,200 for more than one) are poised to drop to $480 and $960. Extending these credits into 2013 could amount to good PR for a disdained Congress.⁵                                                             

The American Opportunity Credit. In 2009, the up-to-$1,800 Hope tax credit was supercharged into the AOC: an up-to-$2,500 education credit which could be claimed for four tax years that include college education rather than two. In 2013, the AOC is scheduled to disappear with an $1,800 (or possibly $1,900) Hope credit slated to reappear. The AOC may be extended into 2013; again, it would be a popular move at a time when Congress is riding a wave of unpopularity.^5,6 

College expense deduction. Back in 2011, you could write off as much as $4,000 in tuition on your federal return. Some legislators would like to see this deduction made available again in 2013 and perhaps even made retroactively available for 2012. It would be a popular move and it could prove a nice “sweetener” on any bill addressing tax issues for the coming year.⁵ 

Charitable IRA gifts. Universities and retirees found the IRA charitable rollover quite useful, but it faded away at the end of 2011. Many in the education community (and some in Congress) would like to see it return for 2013, and given that tax hikes seem to be imminent next year, a big tax break like this might be offered pursuant to a Congressional compromise.⁵        

IDLs & PEPs. In 2010, itemized deduction limits and personal exemption phase-outs were repealed. In 2013, they may return as the federal government seeks much-needed tax revenues.²

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 – money.usnews.com/money/blogs/the-best-life/2012/08/29/get-ready-for-5-key-money-changes-in-2013 [8/29/12]

2 – www.smartmoney.com/taxes/tax-policy/key-tax-issues-to-watch-postelection-1351019063876 [10/23/12]

3 - www.deseretnews.com/article/765589424/Sen-Orrin-Hatch-calls-for-end-of-estate-tax-as-Jan-2013-taxmageddon-looms.html [7/12/12]

4 - online.wsj.com/article/SB10000872396390444734804578066991225311524.html [10/18/12]

5 - www.marketwatch.com/story/14-tax-issues-to-watch-after-the-election-2012-11-01 [11/1/12]

6 - www.finaid.org/otheraid/hopescholarship.phtml [11/8/12]

Can we avert the "fiscal cliff"?

Recently, you may have heard about the “looming fiscal cliff”, the “coming fiscal cliff” and so forth. What exactly is it?  Briefly stated, the “fiscal cliff” is a potential $7 trillion dilemma facing Congress this fall – a Congress not known for ready cooperation. If America goes over it, our economy could stumble.¹ 

Will Congress act before 2013? Federal Reserve Chairman Ben Bernanke introduced the phrase, referring to an economic downfall he fears will result from a potential 2013 combination of federal budget cuts, the expiration of the Bush-era tax cuts, the end of the payroll tax holiday and extended jobless benefits and other recent stimulus measures. Bernanke told Congress that together, these changes could send the U.S. over a “fiscal cliff” and into another recession.²  

How bad might the potential downturn be? Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, thinks the U.S. could see a recession “immediately”. Moody’s economist Mark Zandi thinks it could shave 3% of off America’s inflation-adjusted GDP next year (read: zero growth).¹ 

The hope is that Congress will come together and help the economy avoid the cliff. It won’t be easy. Remember the big fight over the debt ceiling in Congress? Imagine it expanded to other issues, its magnitude amplified to a new level.  

What happens after the election? It will likely be November before Congress really starts to knuckle down and address this dilemma. Legislators have some options:  

*They could punt again. The punt wouldn’t be as embarrassing as the one chosen by the ill-fated “super committee” that couldn’t agree how to reduce the deficit in 2011. It would be more like a handoff: the outgoing Congress could simply extend certain tax cuts or stimulus measures and leave the big and painful decisions for the new Congress. Many journalists and analysts believe that this is exactly what will happen in Washington. Some think a credit downgrade could result.^2,3

*They could extend the Bush-era tax cuts again. If any political change in November is momentous, the stage could be set for another EGTRRA/JGTRRA extension and the planned cuts to defense spending and other key programs might be undone. That would certainly boost the morale of Wall Street and the taxpayer. The consequence? The nation could really pay for it later. Extending the Bush-era cuts would cost the federal government anywhere from $5.35 trillion to over $7 trillion over the next decade, the Congressional Budget Office believes.^1,3 

*They could do nothing. Even if the waning days of the 112th Congress aren’t as fractious as feared, some analysts think that lawmakers will likely let the Bush-era tax cuts, the 2% payroll tax cut and long-term unemployment benefits sunset, as the need for revenue on Capitol Hill has simply become too great.² 

What can the Fed do? In Ben Bernanke’s assessment: basically nothing. In fact, that is more or less what he told Congress this spring: “If no action were to be taken, the size of the fiscal cliff is such that there's, I think, absolutely no chance that the Federal Reserve ... could or would have any ability whatsoever to offset ... that effect on the economy.”³  

What could happen economically before we get to the edge? A June report from analysts at Bank of America expressed some fears: “As the cliff approaches, we expect first firms and then households to start postponing decisions, weakening the economy in advance of the cliff. When you are approaching a cliff, in a deep fog of uncertainty, you slow down.” This spring, Bernanke reminded Congress that “the brinkmanship last summer over the debt limit had very significant adverse effects for financial markets and for our economy” and “knocked down consumer confidence quite noticeably.” He urged lawmakers not to “push us to the 12th hour.”²   

Expect a pitched battle on Capitol Hill. Alan Simpson, who for many years served Wyoming in the Senate, recently told CNNMoney that this lame-duck session of Congress could wrap up with seven weeks of “chaos”. Yes, just seven weeks; if lawmakers wait to tackle this in earnest after the election, that is all the time they will have to consider what could be some of the most pivotal political decisions they will ever make. ³ 

Some political theatre seems to be ahead – a drama with an uncertain ending, with the near-term fate of economy parked at the edge of a cliff.

Kim Bolker may be reached at kbolker@sigmarep.com or 616-942-8600.  This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 not a solicitation or a 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 - money.cnn.com/2012/04/30/news/economy/fiscal_cliff/index.htm [4/30/12]

2 – articles.latimes.com/2012/jun/07/business/la-fi-bernanke-economy-20120608 [6/7/12]

3 – money.cnn.com/2012/05/16/news/economy/fiscal-cliff/index.htm [5/25/12]

What happens here if Greece exits the Euro?

If Greece leaves the eurozone in the coming months, what kind of financial ripples could reach America?  Nobody can predict the endgame yet; Greece may even stay in the euro, although that is looking less and less likely. The big concern isn’t what happens in Greece – it is about what could happen in Spain or Italy as a result of what happens in Greece. 

The effects from a Greek default (and eurozone exit) would likely be felt on four fronts in America – but first, an economic chain reaction would almost certainly play out in Europe. 

A Greek default could imperil Spain & Italy. If Greece leaves the euro, then Greek bondholders lose their money. A crisis of confidence in the euro could prompt institutional investors to either walk away or demand even higher interest rates on Italian and Spanish bonds. The European Central Bank could then step up and provide emergency lending, bond buying and recapitalization efforts. If those efforts were to fall short, the worst-case scenario would be a default in Italy and/or Spain.

 It could also hurt U.S. banks that aren’t sensibly hedged. If Italy and/or Spain default, a severe downturn could hit EU economies and U.S. lenders would be looking at a huge potential problem. If they are capably hedged against the turmoil in the EU, they could possibly ride through it without a lot of damage. If it turns out they have made foolishly speculative bets (cf. Lehman Brothers, JPMorgan), you could have a big wave of fear, which in the worst scenario would foster a credit freeze reminiscent of 2008. Would the Fed step in again to unfreeze things? Presumably so. Without its intervention, you could have a Darwinian scenario play out in the U.S. banking sector, and few economists and investors would see benefit in that. 

The good news (relatively speaking) is that U.S. banks have cut their exposure to Greece by more than 40% as that country’s sovereign debt crisis has unfolded. Pension funds and insurers have joined them.¹   

Stocks could fall sharply & the dollar could soar. The greenback would become a premier “safe haven” if foreign investors lose faith in the euro. At the same time, a crisis of confidence would imply big losses for equities (and by extension, the retirement savings accounts and portfolios of retail investors).  

U.S. companies could be hurt by fewer exports to Europe. Right now, 19% of U.S. exports are shipped to EU nations. If a deep EU recession occurs, demand presumably lessens for those exports and that would hurt our factories. If institutional investors run from the euro, it would also make U.S. exports more costly for Europeans. Additionally, the EU is the top trading partner to both the U.S. and China; as Deutsche Bank notes, the EU accounts for 25% of global trade.²

  Our recovery could be hindered. Picture higher gas prices, a markedly lower Dow, the jobless rate increasing again. In other words: a double dip. 

In mid-May, economists polled by Reuters forecast 2.3% growth for the U.S. economy in 2012 and 2.4% growth in 2013. These economists also believe that were the fate of Greece not on the table, U.S. GDP might prove to be .1-.5% higher.²  

If politicians play their cards right, we may see better outcomes. For example, Greece could elect a new government that decides to abide by the requested austerity cuts linked to EU/IMF bailout money. Greece could remain in the EU and banks in Spain, Italy, Germany and France could ride through the storm thanks to sufficient capital injections. Global stocks would be pressured, but maybe on the level of 2011 rather than 2008. (Maybe the impact wouldn’t even be that bad.) 

In a rockier storyline, Greece becomes the brat of the EU – a newly radical government rejects the bailout terms set by the EU and IMF, Greece leaves the EU and starts printing drachmas again. The EU, IMF and maybe even the Federal Reserve act rapidly to stabilize the EU banking sector. Early firefighting by central banks results in containment of the crisis after several days of shock, with U.S. markets recovering in decent time (yet with investors still nervous about Italy and Spain).  

Containment may be the key. If a Greek default can be averted or made orderly by the EU and the IMF, then the impact on Wall Street may not be as major as some analysts fear – and who knows, the U.S. markets might even end up pricing it in. Greece only represents 2% of eurozone GDP; our exports and credit exposure to Greece are minimal at this juncture. Our money market funds have mostly stopped investing in Europe. So with diplomacy and contingency planning afoot, a “Grexit” might do less damage to the world economy than some analysts believe.²

Kim Bolker may be reached at 616-942-8600 or kbolker@sigmarep.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 not a solicitation or a 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 - www.csmonitor.com/USA/Latest-News-Wires/2012/0514/Greece-s-economic-woes-may-hurt-US [5/14/12]

2 - www.cnbc.com/id/47562567 [5/25/12]

What to do financially when a spouse dies

When a spouse passes away, the emotion and magnitude of the loss can send our lives reeling. This profound change can also affect our finances. All at once, we have a to-do list before us, and the responsibility of it can make us feel pressured. With that in mind, this article is intended as a kind of checklist – a list of some of the key financial matters to address following the death of a spouse.  The first steps. These actions should come first. Some of these steps do require locating some documentation. Hopefully, your spouse kept these documents where you can easily find them – either at home, in a safe deposit box or in an online vault.

  *Contact family members, friends and your spouse’s employer to tell them of your spouse’s passing. (As a courtesy, your spouse’s employer should put you in touch with the person overseeing its employee benefits plan or human resources department.)

*If your spouse owned a business, check to see what plans are in place for its short-term continuation. Will a partner or key employee take the reins for the time being (or for the long term) as a result of a defined succession plan?

*Arrange payment for funeral expenses.

  *Gather/request as many records as you can find to document your spouse’s life and passing – birth and death certificates, a marriage certificate or divorce decree (if applicable), military service records, investment, insurance and tax records, and employee benefit information (if applicable).

  The next steps. Subsequently, it is time to talk with the legal, tax, insurance and financial professionals you trust.

 *Consult your attorney. Assuming your spouse left a will and did not die intestate (i.e., without one), that will should be looked at as a prelude to the distribution of any assets and the settlement of the estate. His or her written wishes should be reviewed.

 *Locate your spouse’s insurance policy and talk to your insurance agent. Notify that agent of your spouse’s passing; he or she will work with you to a) get the claims process going, b) help you reevaluate your own insurance needs, and c) review and perhaps alter beneficiary designations.

 *Notify your spouse’s financial advisor and by extension, the financial custodians (i.e., the banks or investment firms) through which your spouse opened his or her IRAs, money market funds, mutual funds, brokerage accounts, or qualified retirement plan. They must be notified so that these funds may be properly distributed according to the beneficiary forms for these accounts. Please note that the beneficiary forms commonly take precedence over bequests made in a will. (This is why it is important to periodically review beneficiary designations for these accounts.) If there is no beneficiary form on file with the account custodian, the assets will be distributed according to the custodian’s default policy, which often directs assets either to a surviving spouse or the deceased spouse’s estate.¹

 Survivor/spousal benefits. These important benefits may help you to maintain your standard of living after a loss.

 *Contact your local Social Security office regarding Social Security spousal and survivor benefits. Also, visit www.ssa.gov/pgm/survivors.htm online.

 *If your spouse worked in a civil service job or was in the armed forces, contact the state or federal government branch or armed services branch about how to file for survivor benefits.

 Your spouse’s estate. To settle an estate, several orderly steps should be taken.

 *You and/or your attorney need to contact the executor, trustee(s), guardians and heirs relevant to the estate and access the appropriate estate planning documents.

 *Your attorney can also let you know about the possibility of probate. A revocable living trust (or other estate planning mechanisms) may allow you to avoid this process. Joint tenancy and community property laws in many states also help.²

 *The executor for the estate should obtain an Employer Identification Number (EIN) from the IRS. Visit: www.irs.gov/businesses/small/article/0,,id=102767,00.html

 *Any banks, credit unions and financial firms your spouse had a financial relationship with should be notified of his or her death.

 *Your spouse’s creditors will also need to be informed. Any debts will need to be addressed, and separate credit may need to be established for you.

Your own taxes & investments. How does all this affect your own financial life?

 *Review the beneficiary designations on the IRAs, workplace retirement plans and insurance policies that are in your name. With the death of a spouse, beneficiary designations will likely have to be revised.

 *Consider your state and federal tax filing status. A change in status may significantly alter your tax picture.

 *Speaking of taxes, there may be tax implications surrounding any charitable gifts you and your spouse have recently arranged or planned to make. (If a deceased spouse leaves property to a surviving spouse or a tax-exempt charity, that property is exempt from federal estate tax. Any property gifted by your late spouse during his or her life is not subject to probate.)^2,3

*Presuming you jointly owned some assets, it is time to retitle them. In addition to real estate, you may have jointly owned bank accounts, investments and vehicles.

Things to think about when you are ready to move forward. With the passage of time, you may give thought to the short-term and long-term financial and lifestyle consequences of your spouse’s passing.

*Some widowed spouses ponder selling a home or moving to be closer to adult children in such circumstances, but this is not always the clearest moment to make such decisions.

*Your own retirement planning needs. Certainly, you had an idea of what your retirement would be like together; to what degree does this life event change that idea? Will potential sources of retirement income need to be replaced?

*If you have minor children to take care of, will you be able to sustain the family lifestyle on a single income? How do your income sources compare to your fixed and variable expenses?

*Do you need to address college funding in a new way?

*If your spouse owned a business or professional practice, to what extent do you want (or need) to be involved in it in the future?

This article is intended as a checklist – a list of the important financial considerations to address in the event of a tragedy. If you find yourself referring to this article now or you decide to keep it in a drawer or on your computer for some unforeseen time in the future, please know that I am here to help you and assist you as you seek answers to your questions and a measure of financial equilibrium. Simply call or email me.

Kim Bolker may be reached at 616-942-8600 or kbolker@sigmarep.com. 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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 not a solicitation or a 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 - www.forbes.com/forbes/2010/0628/investment-guide-stretch-ira-beneficiary-five-rules-inherited-iras.html1 [6/28/10]

2 - www.nolo.com/legal-encyclopedia/avoid-probate-how-to-30235.html [4/9/12]

3 - www.nolo.com/legal-encyclopedia/estate-gift-tax-faq-29136.html [4/9/12]