Savvy Negotiating: To Get to the Moon, Ask for the Stars

One key way to build serious wealth—whether in a business or your everyday life—is to effectively and consistently negotiate deals that are good for you and your bottom line. Ideally, everyone walks away from a negotiation feeling good about the outcome—a win-win scenario. But ultimately, to be successful you must achieve your minimum goals and preferably a whole lot more.

Trouble is, it’s common for people to end up failing to get what they want due to how they approach negotiations right from the start—from the first declarations of their terms. Here’s how you can avoid that negative outcome and get the results you truly want when hashing out a deal or arrangement with another party.

Start with your goals

Clarity about goals is job one. In any negotiation, you will be well-served by being quite clear about what you want to walk away with. Most people in negotiations have a range of goals, and it’s important you specify the top and bottom of the range. For example:

  • High-end goals. These are the results you would achieve if the negotiations went extraordinarily well for you. Achieving these goals would make you exceptionally satisfied.
  • Minimally acceptable goals. These goals will close the deal if you achieve them, but you’ll walk away from the bargaining table feeling far from thrilled. If you don’t achieve these goals, there is no deal.

By spelling out your range of goals, you are more likely to not get caught up in the negotiations themselves and make a deal that doesn’t work for you.

Take your initial position—and make it big

When bargaining, self-made billionaires commonly make demands they do not expect the people they are negotiating with to accept. Often these are terms and conditions that many would consider extreme or even outrageous. They are, in effect, asking for the stars—a whole lot more than just about anyone would give them.

These billionaires recognize that they will give a little or even a lot along the way, which is both expected and perfectly acceptable. However, they are using the anchoring effect to better their bargaining position and come away with a deal that works well for them

The anchoring effect is a type of cognitive bias that occurs when people make decisions and act on the initial information they receive—the anchor. Once the anchor is set, people tend to be biased toward interpreting other information around the anchor.

There are a number of ways to create an anchor. The easiest is to ask for an outsize outcome at the start of the negotiation. This will usually influence the perception of value for the other party throughout the negotiations.

The anchoring effect also sets the stage for you to implement your concession strategies. This is how you methodically go from asking for the stars to getting the moon—your acceptable result.

STEPS FOR SAVVY NEGOTIATING

Haggling is an integral part of good negotiation, and most people go into negotiations expecting some back-and-forth around numbers and terms. When both sides make concessions, both will more likely walk away satisfied.

By using the anchoring effect, your goal is to give yourself as much room as possible to make concessions and walk away with at least the minimum results you are looking for.

In every negotiation, the concessions you make are based on a combination of art and science. You can’t concede too much or act too quickly, nor can you be inflexible.

To optimize results, there is a delicate balance of give and take that you can strike by keeping these ideas top of mind:

  • Know what you can give up easily and what is very hard to give up. In business negotiations, there are regularly multiple issues, values and conditions. Some will be more important to you, and some less. You will be well-served if you know what really matters and what does not before going into a negotiation.
  • When you give, make sure you get. Concessions should be reciprocal. If you make a concession, you should be looking to get a concession you see as equally valuable. If you make a unilateral concession, you are negotiating with yourself—and are absolutely losing.
  • Incremental concessions are best. If you ask for the stars at the start and too quickly give up a great deal of ground, you will likely lose all credibility and power. Making a large concession willingly tells the other party that there is a lot more you will give up.
  • Make concessions slowly. You want to communicate that these concessions are tough decisions. Tough decisions are ones you usually have to think long and hard about. Therefore, take your time and pace out making concessions.
  • Have a final concession ready to close the deal. Many negotiations—especially complex business deals—are just about there after a lot of back-and-forth, but still do not close. You want something in your back pocket to push negotiations to an acceptable conclusion. It’s therefore often helpful to have a “final” concession you can offer to close the deal you like.

Possible results

By shrewdly asking for outsize terms that the people you’re negotiating with cannot (or should not) take seriously, you arrange the pieces on the chessboard to your advantage. Then, by skillfully making concessions and getting concessions in return, you meaningfully increase the probability of getting the results you really desire.

These are a few possible outcomes of “asking for the stars”:

  • You get the stars. While you might think your requests are outrageous, that does not necessarily mean the people you are negotiating with won’t give them to you. Your counterparties might, for reasons you are unaware of, be so motivated to make the deal that they will accept your over-the-top numbers, terms and conditions. While this outcome generally has a low probability, it is a possibility.
  • You induce the other person to discontinue negotiations. Your requests might be so extreme that the counterparty does not believe you can ever come to an understanding. Consequently, the counterparty might end the negotiations. Like the previous outcome, this one has a low probability of occurring.
  • You get the moon. The moon is your high-end negotiating goal, and you end up making smart concessions and getting good concessions that result in you getting it.

ACKNOWLEDGMENT: This article was published by the BSW Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2018 by AES Nation, LLC.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. He can be reached at 1-800-827-5577. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor.  Cornerstone Financial Group and AIM are separate entities from LPL Financial.

 

Wills & Trusts

The foundation of your rock-solid estate plan.

For so many of us, family is paramount. You probably expect to use your wealth to take care of your family in the here and now—health care, travel, college tuition and the like. But chances are you haven’t thought nearly as much about positioning your assets so they’re ready and able to help the people you love after you’re gone. Even if you have made some headway in this area, your plan for your estate is probably a little—and maybe a lot—out of date.

If that describes your situation, don’t fret. Even if you have many moving parts to your finances, you can get on track by focusing on two main areas of estate planning: wills and trusts. Here’s how to do it.

Where there’s a will, there’s a way

Read this next sentence three times in a row: Everyone should have a will.

Got it? A will should be the basic foundation of every estate plan—the starting point for a well-conceived strategy to transfer assets at death.

A will identifies precisely what you want to have happen to your assets and estate. Dying without a will means you have decided that the state knows what’s best for you and your family. In addition, dying without a will means you want to make the settling of your estate as difficult, as costly and as public as possible.

As with any decision, there are both positives and negatives to a will. That said, we strongly believe the benefits of writing a will far outweigh the drawbacks.

Is a trust for you?

  1. Are your beneficiaries unwilling or unable to handle the responsibilities of an outright gift (investing the assets, spending the gift wisely, etc.)?
  2. Do you want to keep the amount and the ways your assets are distributed to heirs a secret?
  3. Do you want to delay or restrict the ownership of the assets by the beneficiary?
  4. Do you need to provide protection from your and/or your beneficiary’s creditors and plaintiffs?
  5. Do you want to lower your estate taxes?

 If you answered “yes” to any of the five questions, you may find it beneficial to set up a trust.

Advantages:

  • You decide on the disposition of your hard-earned wealth.
  • Estate taxes are mitigated—especially when the will is part of a broader estate plan.
  • You specify who the fiduciaries will be.

Disadvantages:

  • You have to accept that one day—far in the future—you just might die.
  • There is a legal cost associated with writing up a will and with estate planning.

Trust in trusts

The second component of a smart estate plan is often a trust. A trust is nothing more than a means of transferring property to a third party—the trust. Specifically, a trust lets you transfer title of your assets to trustees for the benefit of the people you want to take care of—aka your selected beneficiaries. The trustee will carry out your wishes on behalf of your beneficiaries.

WILLS AND TRUSTS COMPARED 

Broadly speaking, there are two types of trusts: living (established while you are alive) and testamentary (created by your will after you’ve passed). Living trusts are becoming more and more popular to avoid the cost of probate. In the probate process, your representatives “prove” the validity of your will. The probate process also gives any creditors the opportunity to collect their due before your estate is passed to your heirs. There may be a long delay in settling your estate as it goes through probate. To add salt to the wound, probate can be costly. 

A living trust can avoid or mitigate the effects of probate. It is a revocable trust that you establish and of which you are also typically the sole trustee. The assets in your living trust avoid probate at death, and are instead distributed to your heirs according to your wishes.

Living trusts are sometimes said to be superior to a will, but that is certainly not the case for everyone. It’s important that you understand how they compare.

Comparing Wills and Living Trusts

Wills Living Trusts
Are viable only at death. Can have uses while you’re alive.
Are public. Are private.
Are not very good when you’re dealing with more than one state. Are good in every state and not encumbered by states.
Must go through probate. Can generally avoid probate.
Are less expensive to put in place. Are more expensive to put in place and administer.

Is a living trust for you? It depends on your particular situation. Nevertheless, you should certainly consider it in consultation with your legal advisor or wealth manager.

Your next move

We recommend that your estate plan be reviewed every year or two. The review should be conducted by a high-caliber wealth manager or tax professional—one who takes the time to learn what’s changed since you put your solutions in place, assess how those changes might impact your strategy, and make recommendations for getting your solutions current and in accordance with your wishes.

ACKNOWLEDGMENT: This article was published by the BSW Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2017 by AES Nation, LLC.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor.  Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This article is for general information only and is not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice.

 

 

Increasing Farm Efficiency During Challenging Times

It’s no secret that for many producers the past few years have been challenging. The days of $7 corn and $15 beans are more than five years in the rearview mirror and it takes a sharper pencil these days to be profitable and maintain a viable farming operation.

Farm efficiency can be obtained in many different ways. A good farm tax expert can be extremely valuable.  Some farmers focus on being better marketers.  Others key in on reducing costs of inputs and understanding government programs. Using new technologies can help an operator better understand how resources are being used.  Working with a banker to effectively manage capital is very important to other operators.

Few farmers, however, have the time or resources necessary to study all of the areas where efficiencies can be gained. But in these times of lower margins, it’s worth taking a look at areas you might have ignored over the past few years or strategies that you may need to take a second look at.

Technology

Ag technology has come a long way in the past five years, and in general is now more affordable to more producers. Seth Robinson of AgriVision Equipment Group (John Deere) in Winterset, Iowa, says their 3i service often more than pays for the cost of the program for many farmers.

“The 3i program divides your land into three zones from high producing to low producing land and we’ve seen situations where we can raise production in all zones because the data the system collects can allow decisions like planting rates and fertilizing rates to be made on a micro basis. We price 3i on a per bushel basis according to the number of services the farmer wants help with, so we are tied to the growing season and varying conditions, just like the grower.”

Granular is another digital ag solution that consists of products that help farms track their inputs, outputs, crop planning, financial forecasts, and workflow. Their Farm Management Software (FMS) helps farmers understand profitability by field by organizing the numerous data points on the farm.

Dakota Hoben, Customer Success Manager with Granular says, “We typically find farms that are 2,000 acres and above really value the product. But we can work with farms anywhere from 1,000 – 50,000 acres.”

The software is priced on a per acre basis for about $3 and includes software, customer success manager, and support.

In today’s world, time is money – especially during planting and harvest seasons. Applications using smartphones can reduce much of the time it takes to resolve issues. Apps like AgriSync allow farmers to connect with their local, trusted agribusiness consultants for help adopting and implementing new technologies.

Broad based technology has also entered the world of ag finance. Steven Johnson, Iowa State University Extension Farm Management Specialist, said in a recent farmer meeting to Farm Credit Services members in Red Oak, Iowa, that producers who are customers of Farm Credit Services should consider using their AgriPoint technology to move money between accounts, pay bills, wire money and make payments. AgriPoint also offers tools to create balance sheets, cash flows, what-if scenarios, and the ability to apply checks as payments on your desktop or mobile device.

Marketing

Although no one has a crystal ball when it comes to selling commodities, there are ways to certainly put the odds in your favor. Johnson of Iowa State University said understanding your localized historical basis information can add many cents per bushel to the average selling price of corn and beans when part of an overall marketing strategy.  He believes better days are ahead, demand for animal protein will increase demand for grain and current conditions could represent a trough of the 5-7 year cycle.

Tax Strategies

In 1935, United States Court of Appeals for the Second Circuit Judge Learned Hand said, “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.” The U.S. tax code offers numerous opportunities for those in agriculture to use legal means to reduce their taxes. Karen Havens, a CPA in Greenfield, Iowa, who caters to farm clients, believes you can be creative while being ethical and legal.

“Farming has progressed to where business knowledge is essential, from choosing the right business structure to accurate records, tax planning, asset acquisition, cash flows and dealing with lenders. Farmers need to be aware of various tax strategies available to choose strategies that might benefit his particular circumstances, such as retirement funding, employees with employee health benefits, the Domestic Production Deduction, estate or succession planning, as well as other ideas.   Finding knowledgeable professionals to help navigate the maze of options is critical.”

Other strategies that can serve double-duty as both cost-reducers and tax-savers for specific situations include establishing your own captive insurance companies for property casualty coverage, creating conservation easements through land trusts to potentially generate both income tax credits and deductions, and for farmers close to retirement starting cash balance plans to create deductions, postpone taxes and fund retirement. These strategies are not new and not exclusive to agriculture but will most likely grow in popularity as some farmers get closer to retirement and the average farm operation continues to grow.

Government Programs

The United States Department of Agriculture (USDA), through its Farm Service Agency (FSA) division, offers many programs designed to aid farmers in becoming more efficient and potentially improve profitability. Producers are typically fairly well versed on the more popular FSA programs such as the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs that were authorized by the 2014 Farm Bill. Agriculture Loss Coverage-County (ARC-CO) provides revenue loss coverage at the county level. ARC-CO payments are issued when the actual county crop revenue of a covered commodity is less than the ARC-CO guarantee for the covered commodity.  Price Loss Coverage (PLC) program payments are issued when the effective price of a covered commodity is less than the respective reference price for that commodity. The effective price equals the higher of the market year average price (MYA) or the national average loan rate for the covered commodity.

Another popular FSA program is the Conservation Reserve Program (CRP). CRP is a land conservation program administered by FSA.  In exchange for a yearly rental payment, farmers enrolled in the program agree to remove environmentally sensitive land from agricultural production and plant species that will improve environmental health and quality.

Beyond that, there are other programs available that are less well known, such as Noninsured Crop Disaster Assistance Program (NAP), which provides financial assistance to producers of noninsurable crops when low yields, loss of inventory, or prevented planting occur due to natural disasters.

In addition, FSA has many different types of farms loans, such as Guaranteed Farm Loan Programs that help family farmers and ranchers obtain loans from USDA-approved commercial lenders at reasonable terms to buy farmland or finance agricultural production. There are beginning farmer loan programs, minority and women farmer loan programs and emergency farm loans.

Insurance

No one relishes the idea of purchasing insurance, yet there have never been more assets at risk in farming than there is today. Finding effective insurance strategies is a must, and finding efficient ways of paying for insurance is also critical.

“To be the most efficient with their coverage farmers really need to sit down with their agent on an annual basis and review coverage limits,” said Jamie Travis of Hometown Insurance in Creston, Iowa. “I advise my farmers to take risk where they can afford to and save premium.  Many times farmers do not have adequate coverage for their liability exposure.  Umbrellas are relatively inexpensive and they provide coverage in areas where farmers cannot afford to take risk.  If someone is injured or killed as a result of a farmer’s negligence, their responsibility to the injured party could be significantly more than their liability limit.  Adequate umbrella coverage can avoid being forced to sell assets in order to indemnify an injured party.”

In summary

According to futurist Jim Carroll (www.jimcarroll.com) estimates are that the world population will increase nearly 50 percent to almost 9 billion by 2050.  As a result, he predicts a great future for agriculture. To meet the demand, he predicts everyone in agriculture will need to be more efficient.  Producers will have to continue to focus on smarter, better, more efficient strategies in order to stay competitive and thrive.  To do that, they’ll need to seek out professionals in many disciplines to keep them up to date on trends and strategies that can help them stay efficient, improve their profitability and achieve their long-term goals.

Mike Moffitt is a Chartered Financial Consultant and founder of Cornerstone Financial Group with offices in West Des Moines, Iowa, and Creston, Iowa. Using his strategic partner network of professionals in accounting, legal and other key disciplines, he works closely with farmers and ag business owners on strategies that seek to help them grow their business and/or prepare for retirement. He can be reached at 641-782-5577.  Securities offered through LPL Financial, Member FINRA/SIPC.  Investment advice offered through Advantage Investment Management, a registered investment advisor.  Cornerstone Financial Group and Advantage Investment Management are separate entities from LPL Financial.  Other companies and their services mentioned in this article are not affiliated with LPL Financial and Cornerstone Financial Group.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.  There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

 

Explaining the Basis of Inherited Real Estate

What is cost basis? Stepped-up basis? How does the home sale tax exclusion work?

At some point in our lives, we may inherit a home or another form of real property. In such instances, we need to understand some of the jargon involving inherited real estate. What does “cost basis” mean? What is a “step-up?” What is the home sale tax exclusion, and what kind of tax break does it offer?

Very few parents discuss these matters with their children before they pass away. Some prior knowledge of these terms may make things less confusing at a highly stressful time.

Cost basis is fairly easy to explain. It is the original purchase price of real estate plus certain expenses and fees incurred by the buyer, many of them detailed at closing. The purchase price is always the starting point for determining the cost basis; that is true whether the purchase is financed or all-cash. Title insurance costs, settlement fees, and property taxes owed by the seller that the buyer ends up paying can all become part of the cost basis.1

At the buyer’s death, the cost basis of the property is “stepped up” to its current fair market value. This step-up can cut into the profits of inheritors should they elect to sell. On the other hand, it can also reduce any income tax liability stemming from the transaction.2

Here is an illustration of stepped-up basis. Twenty years ago, Jane Smyth bought a home for $255,000. At purchase, the cost basis of the property was $260,000. Jane dies and her daughter Blair inherits the home. Its present fair market value is $459,000. That is Blair’s stepped-up basis. So if Blair sells the home and gets $470,000 for it, her complete taxable profit on the sale will be $11,000, not $210,000. If she sells the home for less than $459,000, she will take a loss; the loss will not be tax-deductible, as you cannot deduct a loss resulting from the sale of a personal residence.1

The step-up can reflect more than just simple property appreciation through the years. In fact, many factors can adjust it over time, including negative ones. Basis can be adjusted upward by the costs of home improvements and home additions (and even related tax credits received by the homeowner), rebuilding costs following a disaster, legal fees linked to property ownership, and expenses of linking utility lines to a home. Basis can be adjusted downward by property and casualty insurance payouts, allowable depreciation that comes from renting out part of a home or using part of a residence as a place of business, and any other developments that amount to a return of cost for the property owner.1

The Internal Revenue Code states that a step-up applies for real property “acquired by bequest, devise, or inheritance, or by the decedent’s estate from the decedent.” In plain English, that means the new owner of the property is eligible for the step-up whether the deceased property owner had a will or not.2

In a community property state, receipt of the step-up becomes a bit more complicated. If a married couple buys real estate in Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, or Wisconsin, each spouse is automatically considered to have a 50% ownership interest in said real property. (Alaska offers spouses the option of a community property agreement.) If a child or other party inherits that 50% ownership interest, that inheritor is usually entitled to a step-up. If at least half of the real estate in question is included in the decedent’s gross estate, the surviving spouse is also eligible for a step-up on his or her 50% ownership interest. Alternately, the person inheriting the ownership interest may choose to value the property six months after the date of the previous owner’s death (or the date of disposition of the property, if disposition occurred first).2,3

In recent years, there has been talk in Washington of curtailing the step-up. So far, such notions have not advanced toward legislation.4

What if a parent gifts real property to a child? The parent’s tax basis becomes the child’s tax basis. If the parent has owned that property for decades and the child cannot take advantage of the federal home sale tax exclusion, the capital gains tax could be enormous if the child sells the property.2

Who qualifies for the home sale tax exclusion? If individuals or married couples want to sell an inherited home, they can qualify for this big federal tax break once they have used that home as their primary residence for two years out of the five years preceding the sale. Upon qualifying, a single taxpayer may exclude as much as $250,000 of gain from the sale, with $500,000 being the limit for married homeowners filing jointly. If the home’s cost basis receives a step-up, the gain from the sale may be small, but this is still a nice tax perk to have.5

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

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 – nolo.com/legal-encyclopedia/determining-your-homes-tax-basis.html [3/30/16]
2 – realtytimes.com/consumeradvice/sellersadvice1/item/34913-20150513-inherited-property-understanding-the-stepped-up-basis [5/13/15]
3 – irs.gov/irm/part25/irm_25-018-001.html
4 – blogs.wsj.com/totalreturn/2015/01/20/the-value-of-the-step-up-on-inherited-assets/ [1/20/15]
5 – nolo.com/legal-encyclopedia/if-you-inherit-home-do-you-qualify-the-home-sale-tax-exclusion.html [3/31/16]

Could Social Security Really Go Away?

Just how gloomy does its future look?

Will Social Security run out of money in the 2030s? For years, Americans have been warned about that possibility. Those warnings, however, assume that no action will be taken to address Social Security’s financial challenges.

Social Security is being strained by a giant demographic shift. In 2030, more than 20% of the U.S. population will be 65 or older. In 2010, only 13% of the nation was that old. In 1970, less than 10% of Americans were in that age group.1

Demand for Social Security benefits has increased, and the ratio of retirees to working-age adults has changed. In 2010, the Census Bureau determined that there were about 21 seniors (people aged 65 or older) for every 100 workers. By 2030, the Bureau projects that there will be 35 seniors for every 100 workers.1

As payroll taxes fund Social Security, the program faces a major dilemma. Actually, it faces two.

Social Security maintains two trust funds. When you read a sentence stating that “Social Security could run out of money by 2035,” that statement refers to the projected shortfall of the Old Age, Survivors, and Disability Insurance (OASDI) Trust. The OASDI is the main reservoir of Social Security benefits, from which monthly payments are made to seniors. The latest Social Security Trustees report indeed concludes that the OASDI Trust could be exhausted by 2035 from years of cash outflows exceeding cash inflows.2,3

Congress just put a patch on Social Security’s other, arguably more pressing problem. Social Security’s Disability Insurance (SSDI) Trust Fund risked being unable to pay out 100% of scheduled benefits to SSDI recipients this year, but the Bipartisan Budget Act of 2015 directed a slightly greater proportion of payroll taxes funding Social Security into the DI trust for the short term. This should give the DI Trust enough revenue to pay out 100% of benefits through 2022. Funding it adequately after 2022 remains an issue.4

If the OASDI Trust is exhausted in 2035, what would happen to retirement benefits? They would decrease. Imagine Social Security payments shrinking 21%. If Congress does not act to remedy Social Security’s cash flow situation before then, Social Security Trustees forecast that a 21% cut may be necessary in 2035 to ensure payment of benefits through 2087.3

No one wants to see that happen, so what might Congress do to address the crisis? Three ideas in particular have gathered support.

*Raise the cap on Social Security taxes. Currently, employers and employees each pay a 6.2% payroll tax to fund Social Security (the self-employed pay 12.4% of their earnings into the program). The earnings cap on the tax in 2016 is $118,500, so any earned income above that level is not subject to payroll tax. Lifting (or even abolishing) that cap would bring Social Security more payroll tax revenue, specifically from higher-income Americans.3

*Adjust the full retirement age. Should it be raised to 68? How about 70? Some people see merit in this, as many baby boomers may work and live longer than their parents did. In theory, it could promote longer careers and shorter retirements, and thereby lessen demand for Social Security benefits. Healthier and wealthier baby boomers might find the idea acceptable, but poorer and less healthy boomers might not.3

*Calculate COLAs differently. Social Security uses the Consumer Price Index for Urban Wage Workers and Clerical Workers (CPI-W) in figuring cost-of-living adjustments. Many senior advocates argue that the Consumer Price Index for the Elderly (CPI-E) should be used instead. The CPI-E often gives more weight to health care expenses and housing costs than the CPI-W. Not only that, the CPI-E only considers the cost of living for people 62 and older. That last feature may also be its biggest drawback. Since it only includes some of the American population in its calculations, its detractors argue that it may not measure inflation as well as the broader CPI-W.3

Social Security could still face a shortfall even if all of these ideas were adopted. The Center for Retirement Research at Boston College estimates that if all of these “fixes” were put into play today, the OASDI Trust would still face a revenue shortage in 2035.3

In future decades, Social Security may not be able to offer retirees what it does now, unless dramatic moves are made on Capitol Hill. In the worst-case scenario, monthly benefits would be cut to keep the program solvent. A depressing thought, but one worth remembering as you plan for the future.

Michael Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

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 – money.usnews.com/money/retirement/articles/2014/06/16/the-youngest-baby-boomers-turn-50 [6/16/14]
2 – fool.com/retirement/general/2016/03/20/the-most-important-social-security-chart-youll-eve.aspx [3/20/16]
3 – fool.com/retirement/general/2016/03/19/1-big-problem-with-the-3-most-popular-social-secur.aspx [3/19/16]
4 – marketwatch.com/story/crisis-in-social-security-disability-insurance-averted-but-not-gone-2015-11-30 [11/30/15]

Retirement Now vs. Retirement Then

Today’s retirees must be more self-reliant than their predecessors.

Decades ago, retirement was fairly predictable: Social Security and a pension provided much of your income, you moved to the Sun Belt, played tennis or golf, and you lived to age 70 or 75.

To varying degrees, this was the American retirement experience during the last few decades of the previous century. Those days are gone; retirees must now assume greater degrees of financial self-reliance.

There is no private-pension safety net today. At one time, when Social Security was paired with a pension from a lifelong employer, a retiree could potentially enjoy a middle-class lifestyle. In January, the average monthly Social Security benefit was $1,341. The highest possible monthly benefit for someone retiring at Social Security’s full retirement age in 2016 is $2,787.80, or $33,453.60 a year. So in many areas of this country, living only on Social Security does not afford you the same lifestyle you may have had when you were working. Elders who thought they could rely on Social Security to get by have learned a bitter truth, one we should note. We must supplement Social Security with other income streams or sources.1,2,3,4

We carry more debt than our parents and grandparents did. It is much easier to borrow money (and live on margin) than it was decades ago. Some people face the prospect of retiring with outstanding student loans, car loans, and business loans, in addition to home loans.3

Some of us are retiring unmarried. With the divorce rate being where it is, some baby boomers will retire alone. Perhaps they will share a residence with a sibling, child, or friends; that may give them something of an economic cushion in terms of meeting daily living costs. Then again, some married households were single-income households in the 1970s and 1980s, but retirees managed.3 

We will probably live longer than our parents did. In 1985, the average life expectancy for a 65-year-old man in this country was 79; the average life expectancy for a 65-year-old woman was 84. Today, the average 65-year-old man is projected to live to 91, the average 65-year-old woman to 94. Our parents could depend on the combination of Social Security, pension income, and fixed-income vehicles for a 10-year or 15-year retirement. In contrast, many of us will have to try some growth investing to keep our money growing across a probable 20-year or 30-year retirement.4

We will likely have to insure ourselves if we retire before age 65. The national average retirement age (according to a SmartAsset study of Census Bureau data) is now 63. With private health insurance becoming the new normal, that means many of us will have to find some kind of private health coverage if we retire too young to be eligible for Medicare. Furthermore, the cost of many out-of-pocket medical expenses not covered by Medicare is certainly greater than it once was.5

We must rise to the financial challenge retirement presents. During the 1980s, more than 40% of U.S. private sector employees participated in a pension plan designed to bring them eventual retirement income. In the middle of that decade, Social Security accounted for 65% of U.S. retiree income. Right now, 19% of private firms offer traditional pension plan programs and Social Security represents but 27% of retiree income.4

Our retirement will differ from that of our parents. It will likely be longer and arguably feature a better quality of life. Every aspect of our later years may become more comfortable, more bearable for ourselves and our loved ones. Retirement planning is one of the most valuable tools to assist you in realizing that goal.

Mike Moffitt may be reached at ph# 641-782-5577 or email:  mikem@cfgiowa.com

Website:  www.cfgiowa.com    

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC.  Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor.  Cornerstone Financial Group and AIM are separate entities from LPL Financial

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 – faq.ssa.gov/link/portal/34011/34019/Article/3736/What-is-the-average-monthly-benefit-for-a-retired-worker [2/17/16]

2 – faq.ssa.gov/link/portal/34011/34019/Article/3735/What-is-the-maximum-Social-Security-retirement-benefit-payable [2/18/16]

3 – blog.nsbank.com/retirement-planning-3/ [12/14/15]

4 – marketwatch.com/story/how-retirement-has-changed-in-the-last-30-years-2016-02-16 [2/16/16]

5 – smartasset.com/retirement/average-retirement-age-in-every-state [10/28/15]

Reducing the Risk of Outliving Your Money

What steps might help you sustain and grow your retirement savings?

“What is your greatest retirement fear?” If you ask retirees that question, “outliving my money” may likely be one of the top answers. Retirees and pre-retirees alike share this anxiety. In a 2014 Wells Fargo/Gallup survey of more than 1,000 investors, 46% of respondents cited that very fear; 42% of the respondents to that poll were making $90,000 a year or more.1

Retirees face greater “longevity risk” today. According to an analysis of Census Bureau data by the Center for Retirement Research at Boston College, the average retirement age in this country is 65 for men and 63 for women. Many of us will probably live into our eighties and nineties; indeed, many of our parents have already lived that long. In 2014 (the most recent year for which Census Bureau data is available), over 72,000 Americans were centenarians, representing a 44% increase since 2000.2,3

If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement to prevent those savings from eroding? As you think ahead, consider the following possibilities and realities.

Realize that Social Security benefits might shrink in the future. Today, there are three workers funding Social Security for every retiree. By federal estimates, there will be only two workers funding Social Security for every retiree in 2030. That does not bode well for the health of the program, especially since nearly one-fifth of Americans will be 65 or older in 2030.4

Social Security’s trust fund is projected to run dry by 2034, and it is quite possible Congress may intervene to rescue it before then. Still, the strain on Social Security will mount over the next 20 years as more and more baby boomers retire. With this in mind, there’s no reason not to investigate other potential retirement income sources now.3

Understand that you may need to work part-time in your sixties and seventies. The income from part-time work can be an economic lifesaver for retirees. Suppose you walk away from your career with $500,000 in retirement savings. In your first year of retirement, you decide to withdraw 4% of that for income, or $20,000. At that withdrawal rate, not even adjusting for inflation, that money will be gone in 21 years. What if you worked part-time and earned $20,000-30,000 a year? If you can do that for five or ten years, you effectively give your retirement savings five or ten more years to last and grow.3

Retire with health insurance and prepare adequately for out-of-pocket costs. Financially speaking, this may be the most frustrating part of retirement. We can enroll in Medicare at age 65, but how do we handle the premiums for private health insurance if we retire before then? Striving to work until you are eligible for Medicare makes economic sense. So does building some kind of health care emergency fund for out-of-pocket costs. According to data from Health Affairs, those costs approached $16,000 a year in 2014 for Americans aged 65-84, and $35,000 a year for Americans aged 85 or older.4

Many people may retire unaware of these financial factors. With luck and a favorable investing climate, their retirement savings may last a long time. Luck is not a plan, however, and hope is not a strategy. Those who are retiring unaware of these factors may risk outliving their money.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

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 – usatoday.com/story/money/personalfinance/2014/09/24/investors-fear-outliving-retirement-savings/16095591/ [9/24/14]
2 – thestreet.com/story/13468811/1/here-rsquo-s-how-to-make-your-money-last-in-retirement.html [2/23/16]
3 – marketwatch.com/story/so-whos-going-to-pay-for-you-to-live-to-be-100-2016-02-17/ [2/17/16]
4 – thinkadvisor.com/2016/02/22/6-ways-to-prevent-going-broke-in-retirement [2/22/16]

In-Kind Distributions from IRAs

Yes, you can take an IRA distribution in the form of an investment.

This may surprise you: you can take an IRA distribution in a form other than cash. This may seem unorthodox, but it can make financial sense for some older IRA owners as well as IRA heirs.

An in-kind distribution from a traditional IRA is fully taxable, just as a cash distribution from a traditional IRA becomes taxable income. Just how is the cash value of the in-kind withdrawal determined? The fair market value of the asset is reported to the IRS as a step in the distribution.1,2

Why would you want to make this type of IRA withdrawal? In certain cases, it may be preferable to withdrawing cash, especially when it comes to Required Minimum Distributions (RMDs) for traditional IRAs.

Maybe you want to keep shares instead of selling them. There are times when you may be reluctant to sell some or all of an investment to satisfy an RMD, because the investment is really performing well. An in-kind withdrawal is an alternative. The amount of the distribution will be treated just like taxable income, but you will still own that asset once it is outside of the IRA. Those shares now have a chance to appreciate further, and you can also elect to donate them to charity.2,3

Maybe you have a cashless IRA. If 0% of your IRA assets are sitting in cash, then one option is to take either a partial or full in-kind withdrawal to satisfy the RMD requirement. You will still retain ownership of the asset(s) distributed in-kind.2

Maybe you see a loser turning into a winner. You hold a poorly performing investment in your IRA, but you sense it will turn around, you suspect its value will soon rise. Rather than liquidate it, shares of it could be withdrawn from the IRA as an in-kind distribution. They will be taxed at their current value when distributed from the IRA as in-kind distributions are treated like taxable income, but in future years, they will only be subject to capital gains tax rates rather than (higher) income tax rates.4

Maybe the IRA has little value. Some “stray” IRAs are not worth very much. If an IRA holds an investment that has so little worth that it seems pointless to have the IRA in the first place, an in-kind distribution may offer a solution. If you own a traditional (or Roth) IRA and make this move before age 59½, you are likely looking at an early-withdrawal penalty as well as taxes. Even so, you may prefer that to keeping up the IRA for years, or carrying a loser investment in the IRA for any number of years while paying attached account fees.2

In-kind IRA distributions can be tricky, as they often involve shares. Share prices fluctuate, and if you are trying to precisely meet your RMD amount with a distribution of shares, there is the risk of coming up short or long. If you come up short, you will need another transaction to satisfy the RMD. If you come out long, that could increase the income tax attached to the RMD. This is the risk you take.5

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

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 – tinyurl.com/hsdkwgn [1/19/14]
2 – newdirectionira.com/ira-info/distributions/what-is-a-distribution [2/3/16]
3 – azcentral.com/story/money/business/consumers/2015/12/22/right-size-your-portfolio-coming-year-nancy-tengler/77780344/ [12/22/15]
4 – time.com/money/2791159/how-are-stocks-taxed/ [2/3/16]
5 – marketwatch.com/story/should-you-take-stock-to-meet-required-minimum-distributions-2014-11-03 [11/3/14]

Should You File Jointly, Or Not?

For many married couples, filing jointly is a good idea, but there are exceptions.

Ninety-five percent of married couples file joint federal tax returns. Filing jointly can be convenient. Frequently, there’s a financial advantage, but that does not mean it should be done without consideration.1

Years ago, there was less incentive to file jointly. That was because the “marriage penalty” for doing so was effectively greater. There is no written “marriage penalty” in the Internal Revenue Code, but, in the past, income tax brackets were structured a bit differently and spouses having similar annual incomes sometimes paid more taxes by filing jointly than single taxpayers did.

There are many good reasons to file jointly. Nearly all of them involve saving money.

Joint filing may give you an effective tax break right off the bat. Currently, married taxpayers who file separately face the 28%, 33%, 35%, and 39.6% income tax brackets at lower income thresholds than other unmarried taxpayers.2

Joint filers can claim significant tax credits that marrieds filing separately cannot. If you want to claim the American Opportunity Tax Credit, the Lifetime Learning Credit, the Elderly or Disabled Credit, or the Earned Income Tax Credit (EITC), you have to file jointly. Joint filing also gives you the potential to claim the full Child Tax Credit, rather than a reduced one.3

Deductions, too, decrease when you file separately as a married couple. Standard deductions fall significantly. Phase-out ranges affect itemized deductions, and some itemized deductions are unavailable for married couples who do not file jointly. Couples who file separate 1040s can only deduct 50% of the capital gains losses joint filers can. In addition, if one spouse elects to itemize deductions, so must the other (there must be a separate Schedule A for each spouse). The spouse with fewer deductions has no ability to use the standard deduction to lower his or her taxable income.2,3

Joint filing even helps you with regard to the Alternative Minimum Tax. When you file separately as a married couple, your AMT exemption falls by 50%. So you may be more susceptible to the AMT if you file separately. If the AMT affects you, you will find many federal tax deductions reduced or unavailable to you.3

Do you live in a community property state? If you do, you may know that state tax law defines what is considered separately held or jointly held property. If you want to itemize deductions in a community property state, the paperwork can be onerous.3

More of your Social Security benefits may be taxed if you file separately. Social Security gives you a “base exemption,” an income threshold above which Social Security benefits may be taxable. The base exemption for married couples filing jointly is $32,000, meaning that if 50% of the Social Security benefits you receive in a tax year plus your other income in a tax year exceeds $32,000, taxes may apply. The base exemption for married couples filing separately who live together at any time during the tax year is $0. It improves to $25,000 for married couples filing separately who live apart for an entire year.4

So why would you not file jointly when married? In certain circumstances, filing separately may be wiser.

Maybe you do not trust your spouse financially. If your spouse is a tax cheat or interprets federal tax law very loosely, filing jointly could prove hazardous in the case of an audit or other troubles. Both spouses must sign a joint return, meaning that both spouses are legally responsible for all taxes, penalties, and fines linked to that return. Yes, an innocent spouse may be offered tax protection by the IRS, but that innocence must be proven.2,3

Maybe you or your spouse have large out-of-pocket medical expenses. If so, and if the spouse contending with such bills earns much less than the other, there may be merit in filing separately. By doing so, the spouse with far less income might have an opportunity to meet the 10% AGI threshold needed to itemize medical expenses. (The 7.5% AGI threshold for itemizing these costs is still in place for taxpayers age 65 and older.)2

Maybe you are separating or divorcing. If that is the case, then it may seem only natural to begin filing separately while still married. Doing so now may lessen the chance of the two of you wading through tax issues in the aftermath of a split.

If you are unsure about whether to file jointly or singly, you can ask a tax professional for his or her opinion. Or, that professional can look at last year’s return and run the numbers for you. Most couples find that filing jointly works out best, but there are exceptions.

Mike Moffitt may be reached at phone# 641-464-2248 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

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/2016/01/26/married-filing-joint-tax-returns-irs-helps-some-couples-with-offshore-accounts/ [2/6/16]
2 – abcnews.go.com/Business/filing-taxes-jointly-good-idea/story?id=22504248 [2/17/14]
3 – foxbusiness.com/features/2015/03/06/should-couples-file-taxes-separately-or-jointly-which-is-best-for.html [3/6/15]
4 – irs.com/articles/how-are-social-security-benefits-taxed [2/11/16]

The Pros & Cons of Roth IRA Conversions

What are the potential benefits? What are the draw backs?

If you own a traditional IRA, perhaps you have thought about converting it to a Roth IRA. Going Roth makes sense for some traditional IRA owners, but not all.

Why go Roth? There is an assumption behind every Roth IRA conversion – a belief that income tax rates will be higher in future years than they are today. If you think that will happen, then you may be compelled to go Roth. After all, once you are age 59½ and have owned a Roth IRA for five years (i.e., once five full years have passed since the conversion), withdrawals from the IRA are tax-free.1

Additionally, you never have to make mandatory withdrawals from a Roth IRA, and you can contribute to a Roth IRA as long as you live, unless you lack earned income or make too much money to do so.2,3

For 2016, the contribution limits are $132,000 for single filers and $194,000 for joint filers and qualifying widow(er)s, with phase-outs respectively kicking in at $117,000 and $184,000. (These numbers represent modified adjusted gross income.)4

While you may make too much to contribute to a Roth IRA, anyone may convert a traditional IRA to a Roth. Imagine never having to draw down your IRA each year. Imagine having a reservoir of tax-free income for retirement (provided you follow IRS rules). Imagine the possibility of those assets passing tax-free to your heirs. Sounds great, right? It certainly does – but the question is, can you handle the taxes that would result from a Roth conversion?

Why not go Roth? Two reasons: the tax hit could be substantial, and time may not be on your side.

A Roth IRA conversion is a taxable event. When you convert a traditional IRA (which is funded with pre-tax dollars) into a Roth IRA (which is funded with after-tax dollars), all the pretax contributions and earnings for the former traditional IRA become taxable. When you add the taxable income from the conversion into your total for a given year, you could find yourself in a higher tax bracket.2

If you are nearing retirement age, going Roth may not be worth it. If you convert a sizable traditional IRA to a Roth when you are in your fifties or sixties, it could take a decade (or longer) for the IRA to recapture the dollars lost to taxes on the conversion. Model scenarios considering “what ifs” should be mapped out.

In many respects, the earlier in life you convert a regular IRA to a Roth, the better. Your income should rise as you get older; you will likely finish your career in a higher tax bracket than you were in when you were first employed. Those conditions relate to a key argument for going Roth: it is better to pay taxes on IRA contributions today than on IRA withdrawals tomorrow.

However, since many retirees have lower income levels than their end salaries, they may retire to a lower tax rate. That is a key argument against Roth conversion.

If you aren’t sure which argument to believe, it may be reassuring to know that you can go Roth without converting your whole IRA.

You could do a partial conversion. Is your traditional IRA sizable? You could make multiple partial Roth conversions through the years. This could be a good idea if you are in one of the lower tax brackets and like to itemize deductions.2

You could even undo the conversion. It is possible to “recharacterize” (that is, reverse) Roth IRA conversions. If a newly minted Roth IRA loses value due to poor market performance, you may want to do it. The IRS gives you until October 15 of the year following the initial conversion to “reconvert’’ the Roth back into a traditional IRA and avoid the related tax liability.5

You could “have it both ways”. As no one can fully predict the future of American taxation, some people contribute to both Roth and traditional IRAs – figuring that they can be at least “half right” regardless of whether taxes increase or decrease.

If you do go Roth, your heirs might receive a tax-free inheritance. Lastly, Roth IRAs can prove to be very useful estate planning tools. (You may have heard of the “stretch IRA” strategy, which can theoretically keep IRA assets growing for generations.) If the rules are followed, Roth IRA heirs can end up with a tax-free inheritance, paid out either annually or as a lump sum. In contrast, distributions of inherited assets from a traditional IRA are routinely taxed.2

Mike Moffitt may be reached at ph# 641-782-5577 or email mikem@cfgiowa.com
Website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.
Distributions made prior to age 59 1/2 may be subject to a federal income tax penalty. If converting a
traditional IRA to a Roth IRA, you will owe ordinary income taxes on any previously deducted traditional
IRA contributions and on all earnings.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

“Stretch IRA” is a marketing term implying the ability of a beneficiary of a Decedent’s IRA to withdraw the least amount of money at the latest allowable time in order to maintain the inherited IRA assets for the longest time period possible. Beneficiary distribution options depend on a number of factors such as the type and age of the beneficiary, the relationship of the beneficiary to the decedent and the age of the decedent at death and may result in the inability to “stretch” a decedent’s IRA. Illustration values will greatly depend on the assumptions used which may not be predictable such as future tax laws, IRS rules, inflation and constant rates of return. Costs including custodial fees may be incurred on a specified frequency while the account remains open.

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 – bankrate.com/finance/retirement/roth-ira-conversion-subject-to-5-year-rule.aspx [10/30/14]
2 – kiplinger.com/article/investing/T046-C000-S002-reap-the-rewards-of-a-roth-ira.html [12/15]
3 – irs.gov/Retirement-Plans/Roth-IRAs [10/23/15]
4 – irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2016 [10/23/15]
5 – thestreet.com/story/13321349/1/roth-recharacterization-how-to-maneuver-your-ira-before-oct-15.html [10/13/15]