As of the beginning of 2013, a new provision became available for participants in 401(k), 403(b) and 457 deferred compensation retirement plans: the Roth 401(k) In-Plan Conversion. This provision allows current employees participating in one of these Qualified Retirement Plans to convert funds from the traditional 401(k) (or other) account into the Designated Roth Account (DRAC) that is part of the plan. This is new and different because previously the only way to convert funds from the 401(k) plan to a Roth-like account was to have left employment by the sponsoring employer.
June, 2014:
Emergency Fund vs. Credit Card
During moments in our lives we are faced with bad luck or simply things that go awry and inevitably cost us money. From a car needing repairs to the water heater going out, or an unexpected doctor bill we don’t plan for these to happen, but we can in place in case they do. As financial planners we generally recommend that our clients have emergency funds in the event that such events are going to happen. On different occasions I will get the argument that an emergency fund isn’t necessary if one has a credit card to simply pay for the unplanned expenses when they happen. Generally, in an emergency a credit card can come in handy as one may not have quick access to cash, etc. However, the flaw with thinking that a credit card can be used in place of an emergency lies here: How do you pay […]
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The Designation Everybody Should Be Aware Of
At some point in your life you have probably started a new job, applied for life insurance, started an IRA or retirement account, or opened a bank account. You may remember when filling out the paperwork that the form asked for a beneficiary – both primary and contingent. This is simply telling the account’s custodian to whom you want your account to go to should you pass away. Your primary beneficiary is the first (hence the name primary) that receives account balance or death benefit. The contingent is who receives the account balance in the event your primary beneficiary predeceases you. When choosing beneficiaries you had the choice of allocating a certain percentage to the primary and some to the contingent if needed. You may have even had two or more primary beneficiaries that you allocated a certain percent of your account to totaling 100% Then you may have forgotten […]
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A Quick Trick to Reduce Your Tax Liability
Now that most folks are recovering from tax time there may be some individuals that paid an excessive amount of tax to Uncle Sam and are looking for ways to reduce their tax liability for next year. This post will be short and sweet, but hopefully it will drive a few points home. The best way to explain this is through an example. Let’s say that Mary and her husband Paul both work and file their taxes jointly. Their tax liability for 2013 was $4,000 – meaning that’s the amount of the check they wrote to the IRS. Needless to say, they are both looking for a potential way to reduce that liability – at least in the here and now. In this case, their marginal tax rate is 25%. The quick trick in this example is to take their tax rate which is 25% and divide it into their […]
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The Power of Endorsements
Whether you rent or own your home chances are you have (or should consider having) renter’s or homeowner’s insurance. Generally these insurances cover you in the event of being liable for damages or if you suffer a loss of your own due to a fire, tornado, hurricane, etc. What many polices do not cover or provide very limited coverage on is specific items such as jewelry, antiques, coins, firearms, etc. Generally if there is coverage for these items it’s for an aggregate amount not to exceed a certain dollar limit – such as $1,000 for the total amount lost. For example, Herb has an extensive coin collection worth $50,000 and his wife Peaches has an engagement ring worth $10,000. Under their normal home policy, if there was a theft, fire or tornado causing a total loss of their coins and ring, they may only get up $2,000 (assuming the aggregate […]
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File Now. Suspend Later.
Suspending benefits is a facet of Social Security filing that usually only gets written about in connection with filing – File and Suspend is often referred to as a single act, but it’s actually two things. First you file for your benefits, which is a definite action with the Social Security Administration, establishing a filed application on your record. Then, you voluntarily suspend receiving benefits. If this happens all at once, the end result is that you have an application filed with SSA, but you’re not receiving benefits. Since you have an application filed (in SSA parlance, you’re entitled to benefits), your spouse and/or dependents may be eligible for a benefit based on your record. Since you are not receiving benefits, your record earns delayed retirement credits (DRCs) of 2/3% per month that you delay receipt of benefits past your Full Retirement Age (FRA). (Note: you can only suspend receipt […]
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Roth 401(k) Rules
If your employer has a 401(k) plan available for you to participate in, you may also have a Roth 401(k) option available as a part of the plan. (We’re referring to 401(k) plans by name here, but unless noted the rules we’re discussing also apply to other Qualified Retirement Plans (QRPs) such as 403(b) or 457 plans.) Roth 401(k) plans are not required when a 401(k) plan is offered, but many employers offer this option these days. The Roth 401(k) option, also known as a Designated Roth Account or DRAC, first became available with the passage of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, with the first accounts available effective January 1, 2006. The Roth 401(k) was designed to provide similar features present in a Roth IRA to the employer-provided 401(k)-type plans. Similar to traditional 401(k) Certain features of the Roth 401(k) are similar to the traditional […]
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New Advisor?
This article is geared mainly toward advisors and planners new to the business or considering changing careers to become a financial advisor or planner; but it can also be useful to folks considering working with an advisor. As you start your new vocation it’s important to know what vocation you are actually in. What I mean by this is don’t be fooled by your future manager or company in to thinking that your job title is what you’ll be doing. For example, your job title might be financial advisor, insurance advisor, financial consultant, etc. You need to consider what it is you’re doing. If your main job (and the main method you get paid) is by selling a product, then your primary job title is salesperson, not financial advisor. This isn’t necessarily a bad thing (unless you don’t like doing it) but it’s important to understand what you’re really doing. […]
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Investment Allocation in Your 401(k) Plan
When you participate in your employer-sponsored 401(k) plan (or any type of Qualified Retirement Plan, including 403(b), 457, etc.), the first step is to determine how much money you will defer into the plan. We discussed this previously in an article about contributions to your 401(k) plan. Once you’ve determined the amount you’ll contribute, the next step is to allocate your funds within the account. This starts with an overall plan for your investment allocation – which you should take time to plan in advance. For the purposes of our illustration here, we’ll say that you have a plan to split your account 75% to stocks and 25% to bonds. Within the stock allocation, you want to split this as 1/3 each to large cap stock, small cap stock, and international stock. In the bond category you want to split this to 80% domestic bonds and 20% international bonds. Now […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.