Articles tagged with: iowa financial planner

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 Rather than liquidate it, shares of it could be withdrawn from the IRA as an in-kind distribution.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]

CFGIowa Weekly Economic Update January 6, 2014

A MAJOR GAIN FOR A CONSUMER CONFIDENCE INDEX

The Conference Board’s monthly gauge of consumer confidence came in at 78.1 for December, beating the 76.0 median forecast from economists polled by Bloomberg. In November, it stood at 72.0. The index is way up from where it once was: its average reading was just 53.7 during the 2007-09 recession.1

HOME PRICES, HOME SALES CONTRACTS INCREASE

While existing home sales have fallen in recent months, the National Association of Realtors offered some positive news last week – pending home sales increased 0.2% in November, a contrast to October’s 1.2% retreat. The October S&P/Case-Shiller Home Price Index showed a 13.6% yearly gain in property prices measured across 20 cities, improved 0.3% from the September edition; that is the best annual gain the Case-Shiller index has recorded since February 2006.1,2

FACTORIES HUM IN DECEMBER

December’s manufacturing PMI (Purchasing Managers Index) from the Institute for Supply Management offered a reading of 57.0 – down from 57.3% in November, but still a mark of solid expansion in the factory sector. Analysts polled by MarketWatch expected the index to decline to 56.6.2

BULLS TAKE A BREATHER AS 2014 BEGINS

Speaking in Philadelphia Friday, Federal Reserve chairman Ben Bernanke asserted that the economy has made “considerable progress”, and that there are “grounds for cautious optimism abroad.” His remarks didn’t give stocks much of a lift to end the week. From December 30-January 3, the S&P 500 lost 0.54%, the Dow 0.05% and the Nasdaq 0.59%. The closing prices Friday: Dow, 16,469.99; Nasdaq, 4,131.91; S&P, 1,831.37.3

THIS WEEK:

On Monday, ISM’s December service sector index and the Census Bureau’s report on December factory orders arrive, and the Senate is expected to approve Janet Yellen’s appointment as Fed chair. Tuesday offers earnings from The Container Store, Apollo Group and Micron. The minutes from the December 17-18 Fed policy meeting will be released on Wednesday, along with the December ADP job-change report and earnings from Family Dollar, Ruby Tuesday, Monsanto and Constellation Brands. Thursday brings December’s Challenger job-cut report, the latest round of initial jobless claims, and earnings news from Supervalu, Alcoa, Texas Industries and PriceSmart. The Labor Department publishes its December employment report on Friday.

% CHANGE

Y-T-D

1-YR CHG

5-YR AVG

10-YR AVG

DJIA

-0.64

+22.99

+16.46

+5.82

NASDAQ

-1.07

+33.26

+30.63

+10.59

S&P 500

-0.92

+25.49

+19.31

+6.52

REAL YIELD

1/3 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

0.75%

-0.54%

2.29%

2.06%


«RepresentativeDisclosure»

The S&P / Case-Shiller U.S. National Home Price Index measures the change in the value of U.S. residential housing market. The S&P / Chase-Shiller U.S. National Home Price Index tracks the growth in value of real estate by following the purchase price and resale value of homes that have undergone a minimum of two arm’s-length transactions. The index is named for its creators, Karl Case and Robert Shiller.

The Institute for Supply Management (ISM) index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production inventories, new orders, and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.

Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

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. 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.

The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index.

NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services.

The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade.

Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.

All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. 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.

Citations.
1 – sfgate.com/business/bloomberg/article/Consumer-Confidence-Index-in-U-S-Increased-to-5111693.php [1/3/14]
2 – marketwatch.com/economy-politics/calendars/economic [1/3/14]
3 – thestreet.com/story/12201583/1/market-hustle-stocks-rebound-ahead-of-bernanke-speech.html [1/3/14]
4 – money.cnn.com/data/markets/dow [1/3/14]
5 – money.cnn.com/data/markets/nasdaq/ [1/3/14]
6 – money.cnn.com/data/markets/sandp/ [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F27%2F12&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F27%2F12&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F3%2F13&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F2%2F09&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F2%2F09&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F2%2F09&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F2%2F04&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F2%2F04&x=0&y=0 [1/3/14]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F2%2F04&x=0&y=0 [1/3/14]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/3/14]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/3/14]

Irrationality Abounds – A Special Post From Mike Moffitt

I noticed an economist I follow had a conference for those number-crunching geeks interested in the big picture on the U.S. and world economies.  He called it the Irrational Economic Summit.  At first, I thought that was a harsh title but upon further review, maybe not.

So much of what’s going on in our world is right in front of our eyes but we often miss what’s important because there’s so much information overload out there.  Here are a couple of examples:

I received an email from a national non-profit organization in Washington, DC that promotes the establishment of bike trails.  They want me to donate and tell my congressman to vote to maintain government funding of trails.  Totally within their right to make this request.  But out of curiosity I checked the annual report and tax filings on their web site, and here’s what I found:

  1. They spend about $800,000 a year in lobbying Congress to get $1.1 million in funding.  They took in another $5.3 million in memberships and contributions. Their top 4 staffers bring home over $600,000 and their headquarters is in Washington – one of the most expensive real estate markets in the U.S. Most of the rest went to expenses but they have over $3 million squirreled away in cash and investments.   They only gave out $1.8 million in grants for trails – supposedly their reason for existence.
  2. There are probably thousands of non-profits like this in America that want money from the U.S. government.

Now let’s look at our federal government’s situation (courtesy of www.usdebtclock.org).  Our CURRENT U.S. debt is about $17 trillion dollars.  Our infinite horizon future debt, according to the Federal Reserve –based on the projected costs of Medicare and Social Security alone– is $125 trillion dollars.  That figures out nearly $400,000 PER CITIZEN and over $1 million PER TAXPAYER (only about 1/3 of the citizens are taxpayers…another issue for another day).  The average assets PER CITIZEN are over $320,000, but of course that’s the average.  Many citizens have far less than that.  So the government’s future unfunded liabilities are more per citizen than each citizen is worth.  You would think this fiasco will end badly someday.

Your financial health is up to YOU! Don’t expect Uncle Sam to be the answer.  The antidote to this spending sickness should be personal saving, investing and living within your means.  Personal responsibility and having a viable plan in case the economy turns sour again just makes sense.  And that’s something we can help with.

Our federal government’s spending should scare us, but most citizens aren’t paying attention or they would not stand for this.  It’s, well, irrational.

If you’d like some help working through some of these issues, or if you have questions, please don’t hesitate to reach out to us. We look forward to hearing from you!

HAPPY NEW YEAR!

Mike Moffit