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May, 2013:

The Crystal Ball

Every so often we get asked by our clients or prospective clients which direction the market is going to go. This is always and entertaining question to get – and some of our “regulars” already know the answer. Having a bit of a sense of humor (albeit dry sometimes) I’ll joke with clients and tell them that the day they handed out crystal balls in my investment class, it was the one time I called in sick – and you only get one chance at the coveted crystal ball. Thus, I forever lost the opportunity to predict the future of the markets. Darn. Inevitably, clients laugh and understand the joke – and take away the underlying theme of the jocularity – that we can’t predict the future, especially in securities markets. But this doesn’t mean we can’t plan ahead. So why do we invest? Why do we save for retirement? […]

Exceptions to the 10% Early Withdrawal Penalty from IRAs and 401(k)s

When you take money out of your IRA or 401(k) plan (or other qualified retirement plan, such as a 403(b) plan), if you’re under age 59½ in most cases your withdrawal will be subject to a penalty of 10%, in addition to any taxes owed on the distribution.  There are many exceptions to this rule though, and the exceptions are not the same for all types of plans.  IRAs have one set of rules, and 401(k)s have another set of rules. The exceptions are always related to the purpose for which the money was withdrawn.  The exact same dollars withdrawn do not have to be used for the excepted purpose, just that the excepted expense was incurred. IRA Exceptions It is important to know that all distributions from your traditional IRA are subject to ordinary income tax, but some distributions are not subject to the early withdrawal penalty.  The list […]

Avoid Awkwardness in the Afterlife–Confirm Your Beneficiary Designations

This is a topic that I cover with all clients, and one that I recommend you for everyone with retirement plans and other accounts with beneficiary designations.  Too often we think we have the beneficiary designation form filled out just the way we want it, and then (once it’s too late) it is discovered that the form hadn’t been updated recently – and the designation is not what we hoped for. I made this recommendation to a client not long ago.  He assured me that he had all of his designations set up just the way he wanted.  His wife, sitting next to him in our meeting, asked him to make sure – talk to the IRA custodian and get a copy of the designation as it stands today.  A bit miffed about it all, he agreed to do so, and did the next day.  Guess what he found – […]

Per Stirpes / Per Capita–What Does it Mean?

When working with your estate planning (even if you don’t realize you are) you may run across the terms per stirpes and per capita.  Choose one type over the other and you could have a significant impact on who eventually receives your estate.  So what do these two terms mean? Dictionary.com defines the two terms as follows: per stirpes – noun; pertaining to or noting a method of dividing an estate in which the descendants of a deceased person share as a group in the portion of the estate to which the deceased would have been entitled. per capita – noun; noting or pertaining to a method of dividing an estate by which all those equally related to the decedent take equal shares individually without regard to the number of lines of descent. This probably seems like just so much gunk to you, so let’s look at an example. Joe […]

Book Review: Born to Blog

Taking a departure from my regular topics of taxes, retirement accounts, and Social Security, today I’m reviewing a book dedicated to the topic of blogging.  This is another of the books that McGraw-Hill has provided for me to review (see note below).  This book, by Mark W. Schaefer and Stanford A. Smith, provides a quick-read overview of the activity of writing a blog successfully.  As with any venture, it’s important at the start to have a goal for the activity, and for many folks it’s simply to get a message out there about a product or service.  For others, the goal is to be a source of information; others yet look to showcase collections of graphics, photos, audio and/or video.  And many hope to gain an audience that will somehow pay off for them – either from sales of products, services or subscriptions, or from ad revenue from third-parties who […]

Book Review: Think, Act, and Invest Like Warren Buffett

This book, by Larry Swedroe, is a must read for individual investors that are looking for the answer to the age-old question – How should I invest? Warren Buffett certainly makes any list of “best investment minds” of our era, no matter who you are.  Author Larry Swedroe would likely make any such list as well, given his many books that he has written on the subject, such as “The Only Guide to a Winning Investment Strategy You’ll Ever Need”, “Investment Mistakes Even Smart Investors Make”, and just as well, the subject of this review. Mr. Swedroe starts out with the basics of Mr. Buffett’s advice, with the sage’s commentary backed by the facts behind them.  For example, regarding market timing: “Our favorite holding period is forever.”  Swedroe follows this advice with evidence of why it pays off for the individual investor in the long run, due to the fact […]

Another “Swim with Jim” Interview on Social Security

I recently once again was honored to be interviewed on the radio by Mr. Jim Ludwick.  Jim is a CERTIFIED FINANCIAL PLANNERTM professional, and his practice is based in Odenton, Maryland with additional offices in Washington, DC, Santa Barbara, California, San Mateo, California, and New York City.  Jim also is a fellow member of the Garrett Planning Network. We discussed the recent new edition of my book, A Social Security Owner’s Manual, 2013 Edition, and the new information that has been provided there.  We also reviewed some of the reasons that the Social Security benefits calculation process is so complex, as well as the concept that, in many cases, it can be more efficient to use IRA resources to help you get by until your Social Security benefits can be maximized. I reviewed a case like this recently in an article at credit.com, entitled My Smartest Money Move: Taking More […]

Fixing an IRA With the “Wrong” Beneficiary

Quite often, for many different reasons (often known only to the deceased original owner), the original owner of an IRA designates a beneficiary that the survivors don’t necessarily agree with. It might be that only one of several children is designated, or perhaps additional beneficiaries are designated along with a spouse.  In cases like these, there are ways to make changes to the outcome of the inheritance.  In this article we specifically deal with the case where only one of four children was designated as the primary beneficiary of the IRA. To resolve the situation, let’s consider the following IRA: John, the decedent, designated April (his daughter) as the primary beneficiary of his IRA.  It isn’t known why John only designated April as the beneficiary, as he has three other children – Bill, Chuck, and Dale – and John had only his IRA as an asset to pass along to […]