Articles tagged with: Michael Moffitt

That First RMD from Your IRA

What you need to know.

When you reach age 70½, the IRS instructs you to start making withdrawals from your Traditional IRA(s). These IRA withdrawals are also called Required Minimum Distributions (RMDs). You will make them annually from now on.1

If you fail to take your annual RMD or take out less than what is required, the IRS will notice. You will not only owe income taxes on the amount not withdrawn, you will owe 50% more. (The 50% penalty can be waived if you can show the IRS that the shortfall resulted from a “reasonable error” instead of negligence.)1

Many IRA owners have questions about the options and rules related to their initial RMDs, so let’s answer a few.

How does the IRS define age 70½? Its definition is pretty straightforward. If your 70th birthday occurs in the first half of a year, you turn 70½ within that calendar year. If your 70th birthday occurs in the second half of a year, you turn 70½ during the subsequent calendar year.2

Your initial RMD has to be taken by April 1 of the year after you turn 70½. All the RMDs you take in subsequent years must be taken by December 31 of each year.3

So, if you turned 70 during the first six months of 2014, you will be 70½ by the end of 2014 and you must take your first RMD by April 1, 2015. If you turn 70 in the second half of 2014, then you will be 70½ in 2015 and you don’t need to take that initial RMD until April 1, 2016.2

Is waiting until April 1 of the following year to take my first RMD a bad idea? The IRS allows you three extra months to take your first RMD, but it isn’t necessarily doing you a favor. Your initial RMD is taxable in the year it is taken. If you postpone it into the following year, then the taxable portions of both your first RMD and your second RMD must be reported as income on your federal tax return for that following year.2

An example: James and his wife Stephanie file jointly, and they earn $73,800 in 2014 (the upper limit of the 15% federal tax bracket). James turns 70½ in 2014, but he decides to put off his first RMD until April 1, 2015. Bad idea: this means that he will have to take two RMDs before 2015 ends. So his taxable income jumps in 2015 as a result of the dual RMDs, and it pushes them into a higher tax bracket for 2015. The lesson: if you will be 70½ by the time 2014 ends, take your initial RMD by the end of 2014 – it might save you thousands in taxes to do so.4

How do I calculate my first RMD? IRS Publication 590 is your resource. You calculate it using IRS life expectancy tables and your IRA balance on December 31 of the previous year. For that matter, if you Google “how to calculate your RMD” you will see links to RMD worksheets at irs.gov and free RMD calculators provided by the Financial Industry Regulatory Authority (FINRA), Kiplinger, Bankrate and others.2,5

If your spouse is at least 10 years younger than you and happens to be designated as the sole beneficiary for one or more IRAs you own, you should refer to Publication 590 instead of a calculator; the calculator may tell you that the RMD is larger than it actually is.6

If you have your IRA with one of the big investment firms, it might calculate your RMD for you and offer to route the amount into another account that you specify. Unless you state otherwise, it will withhold taxes on the amount of the RMD as required by law and give you and the IRS a 1099-R form recording the income distribution.2,5

When I take my RMD, do I have to withdraw the whole amount? No. You can also take it in smaller, successive withdrawals. Your IRA custodian may be able to schedule them for you.3

What if I have multiple traditional IRAs?
You then figure out your total RMD by adding up the total of all of your traditional IRA balances on December 31 of the prior year. This total is the basis for the RMD calculation. You can take your RMD from a single IRA or multiple IRAs.1

What if I have a Roth IRA? If you are the original owner of that Roth IRA, you don’t have to take any RMDs. Only inherited Roth IRAs require RMDs.2

It doesn’t pay to wait. At the end of 2013, Fidelity Investments found that 14% of IRA owners required to take their first RMD hadn’t yet done so – they were putting it off until early 2014. Another 40% had withdrawn less than the required amount by December 31. Avoid their behaviors, if you can: when it comes to your initial RMD, procrastination can invite higher-than-normal taxes and a risk of forgetting the deadline.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.
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 – irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions [7/3/14]
2 – tinyurl.com/ktabwnv [3/30/14]
3 – schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/withdrawals_and_distributions/age_70_and_a_half_and_over [9/11/14]
4 – bankrate.com/finance/taxes/tax-brackets.aspx [9/11/14]
5 – google.com/search?q=how+to+calculate+your+RMD&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb [9/11/14]
6 – kiplinger.com/tool/retirement/T032-S000-minimum-ira-distribution-calculator-what-is-my-min/ [1/14]

The A, B, C, & D of Medicare

Breaking down the basics & what each part covers.

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover, and where they come from.

Parts A & B: Original Medicare. America created a national health insurance program for seniors in 1965 with two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care and nursing home care – but not for long, and only under certain parameters.1

Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $152 daily coinsurance payment may be required of you.3

If you stop receiving SNF care for 30 days, you need a new 3-day hospital stay to qualify for further nursing home care under Part A. If you can go 60 days in a row without SNF care, the clock resets: you are once again eligible for up to 100 days of SNF benefits via Part A.3

If you have had Medicare taxes withheld from your paycheck for at least 40 calendar quarters during your lifetime, you will get Part A coverage for free.1

Part B is medical insurance and helps pick up some of the tab for outpatient care, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings.1,2

Part B isn’t free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient’s income level; in 2014, most Medicare recipients pay $104.90 a month for their Part B coverage. The current yearly deductible is $147. Some people automatically get Part B, but others have to sign up for it.2,4

Part C: Medicare Advantage plans. Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and a great deal more: most feature prescription drug coverage and many include hearing, vision, dental, and fitness benefits. To enroll in a Part C plan, you need have Part A and Part B coverage in place. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums.2

To say not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare’s annual Open Enrollment Period (Oct. 15 – Dec. 7), seniors can choose to switch out of Original Medicare to a Part C plan or vice versa, although any such move is much wiser with a Medigap policy already in place.5

How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance and deductibles for you. Some Medigap policies can even help you pay for medical care outside the United States. You have to pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect.6

Medigap plans now look like poor cousins of Part C plans. In fact, seniors haven’t been able to buy a Medigap policy offering prescription drug coverage since 2005.6

Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going.1,2

Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare’s website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you.7

Part C & Part D plans are assigned ratings. Medicare annually rates these plans (one star being worst, five stars being best) according to member satisfaction, provider network(s) and quality of coverage. As you search for a plan at medicare.gov, you also have a chance to check out the rankings.8

Mike Moffitt may be reached at phone# 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 – dailyfinance.com/2013/05/14/medicare-explained-part-a-b-c-d/ [5/14/13]
2 – info.tuftsmedicarepreferred.org/medicare-matters-blog/bid/74844/Medicare-Part-A-B-C-and-D-What-does-it-all-mean [10/1/13]
3 – medicare.gov/coverage/skilled-nursing-facility-care.html [9/17/14]
4 – medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html [9/17/14]
5 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html#collapse-3192 [9/17/14]
6 – medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [9/17/14]
7 – medicare.gov/part-d/coverage/part-d-coverage.html [9/17/14]
8 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html [9/17/14]

A Tribute to the American Worker

Cornerstone Financial Group would like to pay tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.  Enjoy the Labor Day holiday!

LaborDay RWB

Mike Moffitt may be reached at phone# 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.

Adjusting to Retirement

What people don’t always realize about life after work.

If you have saved and invested consistently for retirement, you may find yourself ready to leave work on your terms – with abundant free time, new opportunities, and wonderful adventures ahead of you. The thing to keep in mind is that the reality of your retirement may not always correspond to your conception of retirement. There will inevitably be a degree of difference.

Some new retirees are better prepared for that difference than others. They learn things after leaving work that they wished they could have learned about years earlier. So with that in mind, here are a few of the little things people tend to realize after settling into retirement.

Your kids may see your retirement differently than you do. Some couples retire and figure on spending more time with kids and grandkids – they hang onto that five-bedroom home even though two people are living in it because they figure on regular family gatherings, or they move to another state to be closer to their kids. Then they find out that their children didn’t really count on being such frequent company.

Financial considerations come into play here as well. Keeping up a big home in retirement can cost big dollars, and if you move to another area, there is always the chance that a promotion or the right job offer could make your son or daughter relocate just a few years later. The average American worker spends 4.6 years at a given job, and less than 10% of U.S. workers in their twenties and thirties stay at the same job for a decade.1

Medicare falls short when it comes to dental, vision & hearing care. Original Medicare (Parts A & B) will pay for some things – cataract surgery and yearly glaucoma tests for people at risk for that disease, for example, as well as dental procedures that are deemed necessary prior to another medical procedure covered under Medicare. These are exceptions to the norm, however, and as people’s sight, teeth and hearing become more problematic as they age, it can be frustrating to realize what Medicare won’t cover.2

You may lose the impulse to work a little. These days, most retirees at least think about working part-time. Actually doing that may not be as easy as it first seems. It is a lot harder to get hired at age 65 than it is at age 45 – no one is denying that – and part-time work tends toward the mundane and unfulfilling. If you are able to earn income as a consultant or through other types of self-employment, you may be truly satisfied by the work you do and be able to set your own schedule, too.

Retirement income comes with income taxes. While retirees anticipate (and certainly appreciate) distributions from an IRA or an employer-sponsored retirement plan, few retirees map out a sequence or strategy intended to let them take distributions from retirement and investment accounts with the least tax impact. Generally speaking, you want to draw down your taxable accounts first, then the tax-advantaged accounts, and lastly your tax-free accounts. This way, you are giving the retirement money that is taxed least more time to compound.

Under the typical model withdrawal scenario, this sequencing a) offers the potential to reduce the tax bite from all these distributions, b) promotes greater longevity for retirement savings. The wealthier the retiree is and the higher the projected rate of return for his or her portfolio, the more sense the strategy usually makes. If a retiree has very low taxable income or large unrealized gains on taxable assets, it may not be wise to follow this rule of thumb. Health and longevity factors also influence withdrawal strategies, of course.3

Retirees also need to know something about the IRS rules for retirement accounts – if the assets are withdrawn too soon or used for an inappropriate purpose, penalties can result and tax advantages can be lost.

Retirement is a transition, but it isn’t a solution. There are people that are really eager to retire, people that come to believe that retirement will wipe away all that is dull and restrictive from their lives. Retiring often leads to a rewarding new phase of life, but it won’t solve health issues, family dilemmas or business or money problems.

You may have plenty of time on your hands. If you and/or your spouse have routinely worked 50-60 hours a week, it can be tough to come down from that once you are retired. Your urge to be productive will persist, and sooner or later, you will find ways to stay busy, contribute and make a difference. Thinking about how you will spend your time in retirement before retirement is wise, as you don’t want to risk staring at (or climbing) the walls.

Adjusting to retired life takes a bit of time for everyone. Adjustment can become easier with a candid recognition of certain retirement realities.

Michael Moffitt be reached at phone: 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 – marketwatch.com/story/americans-less-likely-to-change-jobs-now-than-in-1980s-2014-01-10 [1/10/14]
2 – ncoa.org/enhance-economic-security/benefits-access/how-to-get-help-for-dental.html [4/17/14]
3 – tiaa-crefinstitute.org/public/institute/research/trends_issues/ti_taxefficient_1006.html [10/06]

Legacy Planning for Women

Think about the eventual destiny of your Wealth.

SS life expectancy

Women often become guardians of family wealth. Many women outlive their spouses, and have the opportunity to have the “final say” (from an estate planning standpoint) about the wealth they have built or inherited. Legacy planning is essential for single women and couples, too, as one or two successful careers may leave a woman or a couple with a significant estate.

So how do you take steps to convey the bulk of your wealth to the next generation, or to your favorite causes or charities after you are gone? It all starts with a conversation today – a conversation with a legacy planning professional.

Analyze the risks to your net worth & strategize to alleviate them. You have years to go, perhaps many years, before you pass away. In those years or decades, you must manage portfolio risk, taxation, medical or long term care costs, and perhaps “predators and creditors” as well. What tax and risk management strategies can be put into place with an eye toward enhancing your net worth? Can you reduce the size of your taxable estate along the way?

How might trusts come into play? If you want to shrink your taxable estate, a well-crafted trust may provide a way to do it. There are many, many different kinds of trusts. A basic revocable living trust helps a family avoid probate, but it doesn’t do anything to reduce estate taxes. Other trusts do offer grantors and beneficiaries opportunities for substantial estate and/or income tax savings.1

For example, you can bequeath an amount of money up to the limit of the current estate tax exemption to a bypass trust; at your death, the remainder of your estate can therefore transfer to your spouse tax-free, or optionally your spouse can enjoy income from the trust while living with your heirs receiving the remaining principal tax-free at his or her death. Blended families sometimes choose to use a qualified terminable interest property trust (QTIP) plus a bypass trust to direct income derived from assets within an estate to a surviving spouse and then the bulk of the estate to their children and stepchildren. Grandparents sometimes use generation-skipping trusts (GSTs) to forward big chunks of money tax-free to grandchildren.2

Women business owners have employed irrevocable life insurance trusts (ILITs) to shrewdly remove their life insurance from their taxable estates. In an ILIT, the trust becomes the owner of the life insurance policy. When the business owner passes away, the beneficiaries receive tax-free policy proceeds, which can be used to sustain the family business and pay estate costs.
A qualified personal residence trust (QPRT) will permit you to gift your primary residence or vacation home to your children while you retain control of it for the term of the trust (typically 10 years). If your home seems poised to rise in value, the QPRT may lead to major estate and gift tax savings – it helps you transfer the home out of your taxable estate, thereby reducing its size. The hitch is that to validate the QPRT, you have to outlive the term of trust. Assuming you do, you can either a) move out of your house at that point or b) keep living in it while paying your heirs fair market rent as a tenant.2

How well can your legacy plan sustain your values? Can you design it to teach your adult children and grandchildren lessons in character, responsibility, ethics and social service? Philanthropically, what do you want to accomplish? If you want to direct wealth to charities or other non-profits, you will need to pick one or more vehicles with the help of a legacy planner – options may include a family foundation, a charitable remainder trust (CRT), a tax-deductible charitable gift of appreciated securities with a resulting income stream, or donor-advised funds. A conversation with a tax professional can inform you of the kinds of assets you do and don’t want to gift from a taxation perspective.

As you craft your legacy plan, can you do it at reasonable cost? There is truth in the old maxim “you get what you pay for”, but at the same time, you want to work with a legacy planner whose fees aren’t exorbitant. Even the fees for creating a simple living trust can vary widely. You definitely want the help of experienced professionals here; given that each legacy plan is on some level an agreement with the federal tax code, legacy planning is not a do-it-yourself project.

Your legacy plan can represent your final, thoughtful gift to your loved ones. When you think of it that way, it becomes easier to conceive and implement with the input of your spouse, your children and your grandchildren. Along the way, valuable money lessons can be taught and responsibilities shouldered.

Michael Moffitt may be reached at ph. 641-782-5577 or 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.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

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 – kiplinger.com/article/retirement/T021-C000-S001-four-facts-of-living-trusts.html#iwrC4LSHbmjf9emt.99 [4/4/13]
2 – money.cnn.com/magazines/moneymag/money101/lesson21/index6.htm [9/17/13]

ComplianceMAX tracking # 1-205954

Less Protection for Inherited IRAs

They are no longer exempt from creditors & bankruptcy proceedings

A SCOTUS ruling raises eyebrows. On June 12, 2014, the Supreme Court ruled 9-0 that assets held within inherited IRAs by non-spousal beneficiaries do not legally constitute “retirement funds.” Therefore, those assets are not protected from creditors under federal bankruptcy statutes.1,2

This opinion may have you scratching your head. “IRA” stands for Individual Retirement Arrangement, right? So how could IRA assets fail to qualify as retirement assets?

Here is the background behind the decision. In 2010, a Wisconsin resident named Heidi Heffron-Clark filed for Chapter 7 bankruptcy. In doing so, she listed an inherited IRA with a balance of around $300,000 as an exempt asset. No doubt this seemed reasonable: the Bankruptcy Abuse Prevention and Consumer Protection Act provided a cumulative $1 million inflation-adjusted bankruptcy exemption for both traditional IRAs and Roth IRAs in 2005.3

So under BAPCPA, wasn’t that $300K in inherited IRA funds held by Ms. Heffron-Clark creditor-protected? Her creditors, the bankruptcy trustee and the Wisconsin bankruptcy court all thought not. That wasn’t surprising, as bankruptcy trustees have issued numerous challenges to the exemption status of inherited IRAs since BAPCPA’s passing.3

Clark v. Rameker made it all the way to the country’s highest court, and boiled down to one question: is an inherited IRA a retirement account, or not?

The Supreme Court rejected the idea that a retirement account for one individual automatically becomes a retirement account for the individual who inherits it. It made that stand based on three features of inherited IRAs:

** The beneficiary of an inherited IRA can draw down all of the IRA balance at any time and use the money for anything without any penalty. Compare that to the original IRA owner, who will face penalties for (most) IRA distributions taken before age 59½.
** Typically, beneficiaries of inherited IRAs must start to take required minimum distributions (RMDs) in the year after they inherit the IRA; it doesn’t matter how old they are when that happens. They could be 68 years old, they could be 8 years old – age doesn’t factor into the RMD rules.
** Unlike the original IRA owner, the beneficiary of an inherited IRA can’t contribute to that account – another strike against the contextualization of an inherited IRA as a retirement fund.3

All this gave the high court a basis for its decision.

Do IRA funds that pass to surviving spouses remain creditor-protected? It would seem so. Frustratingly, the Supreme Court didn’t tackle that question in its ruling. IRAs inherited from spouses are still presumably exempt from federal bankruptcy laws, and if a surviving spouse rolls over inherited IRA assets into an IRA of his or her own, the resulting enlarged IRA is presumably still defined as a retirement account. Oral arguments heard in Clark v. Rameker may help to reinforce this view; the bankruptcy trustee’s lawyer emphasized the differences between Ms. Heffron-Clark’s inherited IRA and one inherited from a decedent.3

State laws may save some inherited IRA assets. If a non-spousal beneficiary inherits an IRA and lives in Alaska, Arizona, Florida, Missouri, North Carolina, Ohio or Texas, state law is on his or her side. In those states, bankruptcy exemption statutes shelter inherited IRAs.2

What if the heir lives elsewhere? That could pose a problem. If an IRA owner fails to play defense, the IRA assets could one day be at risk if a non-spousal beneficiary inherits them.

Designating a trust as the IRA beneficiary isn’t the only option here, but it certainly has merit. The hitch is that putting an IRA into a trust is rather involved. Trusts also come with fees, paperwork and complexity, and the non-spousal beneficiary of the IRA assets should have some financial literacy.1

In the case of a traditional IRA, a Roth conversion might be an option worth examining. (The conversion would have to happen during the original owner’s lifetime.) Another option: some of the IRA balance could be spent on life insurance which could be left to a trust; life some of the IRA balance could be spent on life insurance which could be left to a trust; life insurance proceeds are tax-free, and a life insurance policy is much more suited to inclusion in a trust than a traditional or Roth IRA.2

The bottom line? If you fear that the heir(s) to your IRA might face bankruptcy proceedings someday, talk with a financial or legal professional about your options. If state law won’t protect those assets, a trust might be wise.

Mike Moffitt may be reached at phone# 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.

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.

Life insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of 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 – blogs.marketwatch.com/encore/2014/06/12/scotus-inherited-iras-not-retirement-accounts/ [6/12/14]
2 – tinyurl.com/n9g4acw [7/13/14]
3 – theslottreport.com/2014/06/supreme-court-inherited-iras-are-not.html [6/18/14]

Fire it Up!

Here is another delicious recipe from Judy that utilizes fresh vegetables from the garden. Fire up your grill and enjoy.

Dilly Vegetable Medley

Ingredients
¼ Cup olive oil
2 Tablespoons minced fresh basil
2 Tablespoons dill weed
½ Teaspoon salt
½ Teaspoon pepper
7 Small yellow summer squash, cut into ½ inch slices
1 Pound Yukon Gold potatoes, cut into ½ inch cubes
5 Small carrots, cut into ½ inch slices

In a very large bowl, combine the first five ingredients. Add vegetables and toss to coat. Place half of the vegetables on a double thickness of heavy-duty foil (about 18 in. square). Fold foil around vegetables and seal tightly. Repeat with remaining vegetables. Grill, covered, over medium heat for 20-25 minutes or until potatoes are tender, turning once. Yield: 13 servings.

Nutrition Facts: ¾ Cup equals 91 calories, 4 g fat (1 g saturated fat), 0 cholesterol, 109 mg sodium, 12 g carbohydrate, 2 g fiber, 2 g protein. Diabetic Exchanges: 1 vegetable, 1 fat, ½ starch.

Note: Judy has also used a combination of different vegetables such as sweet potatoes, onions, celery and mushrooms.

How and When to Sign Up for Medicare

Breaking down the enrollment periods and eligibility.

Medicare enrollment is automatic for some.
For those receiving Social Security benefits, the coverage starts on the first day of the month you turn 65. Your enrollment is also automatic when you are under 65, disabled, and receiving benefits from Social Security for 24 months. The exception to this would be for people with Amyotrophic Lateral Sclerosis (ALS, perhaps better known as Lou Gehrig’s disease) for whom Part A and Part B begin the month disability benefits begin. Part A is hospital insurance; Part B is medical insurance. 1
If you’re getting Social Security checks and approaching age 65, you’ll get a Medicare card in the mail three months before your 65th birthday. If you are getting SSDI (Social Security Disability Insurance; regardless of your age), the card will arrive coincidental with your 25th month of disability.1
Oh yes, there is another important criterion: you must be a U.S. citizen or a permanent legal resident of this country. If so, you or your spouse must have earned sufficient credits to be eligible for Medicare, typically earned over 10 years.2

Some of us have to contact the SSA. If you’re coming up on 65 and not receiving Social Security benefits, SSDI or benefits from the Railroad Retirement Board, you can still apply for Medicare coverage. You can visit your local Social Security Administration office or dial (800) 772-1213 or visit www.socialsecurity.gov/medicareonly/ to determine your eligibility.1

When can you add or drop forms of Medicare coverage? Medicare has enrollment periods that allow you to do this.
*The initial enrollment period is seven months long. It starts three months before the month in which you turn 65 and ends three months after that month. You can enroll in any type of Medicare coverage within this seven-month window – Part A, Part B, Part C (Medicare Advantage Plan), and Part D (prescription drug coverage). As it happens, if you don’t sign up for some of this coverage during the initial enrollment period, it may cost you more to add it later.3
*Once you are enrolled in Medicare, you can only make changes in coverage during certain periods of time. For example, the open enrollment period for Part D is October 15-December 7, with Part D coverage starting January 1.4
*The Medicare Advantage Disenrollment Period occurs between January 1 and February 14 of each year. In this time frame, you have an opportunity to get out of a Medicare Advantage plan and either switch to original Medicare or a Medicare Cost plan with or without Part D coverage. If you do switch to original Medicare or a Medicare Cost plan without prescription drug coverage, you can elect to supplement that coverage with a separate prescription drug plan. If you enroll in Part D during this period, coverage starts on the first day of the month after the plan receives your enrollment form.3,4

Do you have questions about eligibility, or the eligibility of your parents? Your first stop should be the Social Security Administration (see the contact information in the fourth paragraph above). You can also visit www.medicare.gov and www.cms.gov.

Michael Moffitt may be reached at phone (641)-782-5577 or e-mail mikeM@cfg.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 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 – medicare.gov/sign-up-change-plans/get-parts-a-and-b/get-parts-a-and-b.html#collapse-3101 [3/20/14]
2 – aarp.org/health/medicare-insurance/info-04-2011/medicare-eligibility.html [1/21/14]
3 – medicare.gov/Pubs/pdf/11219.pdf [10/12]
4 – medicare.kaiserpermanente.org/wps/portal/medicare/plans/learn/enrollment [2/20/14]

After QE3 Ends

Can stocks keep their momentum once the Federal Reserve quits easing?

“Easing without end” will finally end.
According to its June policy meeting minutes, the Federal Reserve plans to wrap up QE3 (Quantitative Easing) this fall. Barring economic turbulence, the central bank’s ongoing stimulus effort will conclude on schedule, with a last $15 billion cut to zero being authorized at the October 28-29 Federal Open Market Committee meeting.1,2

So when might the Fed start tightening? As the Fed has pledged to keep short-term interest rates near zero for a “considerable time” after QE3 ends, it might be well into 2015 before that occurs.1

In June, 12 of 16 Federal Reserve policymakers thought the benchmark interest rate would be at 1.5% or lower by the end of 2015, and a majority of FOMC members saw it at 2.5% or less at the end of 2016.3

It may not climb that much in the near term. Reuters recently indicated that most economists felt the central bank would raise the key interest rate to 0.50% during the second half of 2015. In late June, 78% of traders surveyed by Bloomberg News saw the first rate hike in several years coming by September of next year.4,5

Are the markets ready to stand on their own? Quantitative easing has powered this bull market, and stocks haven’t been the sole beneficiary. Today, almost all asset classes are trading at prices that are historically high relative to fundamentals.

Some research from Capital Economics is worth mentioning: since 1970, stocks have gained an average of more than 11% in 21-month windows in which the Fed greenlighted successive rate hikes. Bears could argue that “this time is different” and that stocks can’t possibly push higher in the absence of easing – but then again, this bull market has shattered many expectations.6

What if we get a “new neutral”? In 2009, legendary bond manager Bill Gross forecast a “new normal” for the economy: a long limp back from the Great Recession marked by years of slow growth. While Gross has been staggeringly wrong about some major market calls of late, his take on the post-recession economy wasn’t too far off. From 2010-13, annualized U.S. Gross Domestic Product (GDP) averaged 2.3%, pretty poor versus the 3.7% it averaged from the 1950s through the 1990s.3

Gross now sees a “new neutral” coming: short-term interest rates of 2% or less through 2020. Some other prominent economists and Wall Street professionals hold roughly the same view, and are reminding the public that the current interest rate environment is closer to historical norms than many perceive. As Prudential investment strategist Robert Tipp told the Los Angeles Times recently, “People who are looking for higher inflation and higher interest rates are fighting the last war.” Lawrence Summers, the former White House economic advisor, believes that the U.S. economy could even fall prey to “secular stagnation” and become a replica of Japan’s economy in the 1990s.3

If short-term rates do reach 2.5% by the end of 2016 as some Fed officials think, that would hardly approach where they were prior to the recession. In September 2007, the benchmark interest rate was at 5.25%.3

What will the Fed do with all that housing debt? The central bank now holds more than $1.6 trillion worth of mortgage-linked securities. In 2011, Ben Bernanke announced a strategy to simply let them mature so that the Fed’s bond portfolio could be slowly reduced, with some of the mortgage-linked securities also being sold. Two years later, the strategy was modified as a majority of Fed policymakers grew reluctant to sell those securities. In May, New York Fed president William Dudley called for continued reinvestment of the maturing debt even if interest rates rise.7

Bloomberg News recently polled more than 50 economists on this topic: 49% thought the Fed would stop reinvesting debt in 2015, 28% said 2016, and 25% saw the reinvestment going on for several years. As for the Treasuries the Fed has bought, 69% of the economists surveyed thought they would never be sold; 24% believed the Fed might start selling them in 2016.7

Monetary policy must normalize at some point. The jobless rate was at 6.1% in June, 0.3% away from estimates of full employment. The Consumer Price Index shows annualized inflation at 2.1% in its latest reading. These numbers are roughly in line with the Fed’s targets and signal an economy ready to stand on its own. Hopefully, the stock market will be able to continue its advance even as things tighten.6

Mike Moffit may be reached at phone# 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 – marketwatch.com/story/fed-plans-to-end-bond-purchases-in-october-2014-07-09 [7/9/14]
2 – telegraph.co.uk/finance/economics/10957878/US-Federal-Reserve-on-course-to-end-QE3-in-October.html [7/9/14]
3 – latimes.com/business/la-fi-interest-rates-20140706-story.html#page=1 [7/6/14]
4 – reuters.com/article/2014/06/17/us-economy-poll-usa-idUSKBN0ES1RD20140617 [6/17/14]
5 – bloomberg.com/news/2014-07-07/treasuries-fall-after-goldman-sachs-brings-forward-fed-forecast.html [7/7/14]
6 – cbsnews.com/news/will-the-fed-rate-hikes-rattle-the-market/ [7/10/14]
7 – bloomberg.com/news/2014-06-17/fed-will-raise-rates-faster-than-investors-expect-survey-shows.html [6/17/14]

Apply for Social Security Now … or Later?

 

When should you apply for benefits? Consider a few factors first.

Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?

Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how long you will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again.

When are you eligible to receive full benefits?
The answer may be found online at socialsecurity.gov/retire2/agereduction.htm.

How much smaller will your check be if you apply at 62? The answer varies. As an example, let’s take someone born in 1952. For this baby boomer, the full retirement age is 66. If that baby boomer decides to retire in 2014 at 62, his/her monthly Social Security benefit will be reduced 25%. That boomer’s spouse would see a 30% reduction in monthly benefits.1
Should that boomer elect to work past full retirement age, his/her benefit checks will increase by 8.0% for every additional full year spent in the workforce. (To be precise, his/her benefits will increase by .67% for every month worked past full retirement age.) So it really may pay to work longer.2

Remember the earnings limit. Let’s put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2014, yet stays in the workforce. If he/she earns more than $15,480 in 2014, the Social Security Administration will withhold $1 of every $2 earned over that amount.3

How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income. (Different rules apply for those who get Social Security disability benefits or Supplemental Security Income checks.)4
Please note that the SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,480 earnings limit.4

Some fine print worth noticing. If you reach full retirement age in 2014, then the SSA will deduct $1 from your benefits for each $3 you earn above $41,400 in the months preceding the month you reach full retirement age. So if you hit full retirement age early in 2014, you are less likely to be hit with this withholding.4
Did you know that the SSA may define you as retired even if you aren’t? This actually amounts to the SSA giving you a break. In 2014 – assuming you are eligible for Social Security benefits – the SSA will consider you “retired” if a) you are under full retirement age for the entire year and b) your monthly earnings are $1,290 or less. If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you “retired” if you work less than 15 hours a month at your business.2,4
Here’s the upside of all that: if you meet the tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security check for any whole month of 2014 in which you are “retired” under these definitions. You can receive that check no matter what your earnings come to for all of 2014.4

Learn more at socialsecurity.gov. The SSA website is packed with information and user-friendly. One last little reminder: if you don’t sign up for Social Security at full retirement age, make sure that you at least sign up for Medicare at age 65.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
website: 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 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 – socialsecurity.gov/retire2/agereduction.htm [2/26/14]
2 – socialsecurity.gov/retire2/delayret.htm [2/26/14]
3 – socialsecurity.gov/cola/ [2/26/14]
4 – http://ssa.gov/pubs/EN-05-10069.pdf [2/26/14]