Monthly Archives: August 2012

Naming IRA Beneficiaries

It is important to make careful choices when naming your IRA beneficiaries.  At death, the people named as beneficiaries are entitled to receive the IRA assets.  This is true without respect to any wishes expressed in your will or other documents.

You should also consider the whether you should name a trust or estate as beneficiary.  Ed Slott in Financial Planning magazine points out that estates and trusts do not have a life expectancy.

Generally, it is not advisable to name your estate as a primary or contingent beneficiary because death distribution options will be limited when an estate inherits an IRA. This is because an estate does not have a life expectancy and thus cannot stretch death distributions over a long period of time.

If you wish a specific person to receive the assets held in an IRA, it is best to name that person as beneficiary or contingent beneficiary.

Questions about benefiary designations?  Check with your attorney, financial advisor or send us an inquiry.

Finding the right retirement community for you.

For some people, a retirement community brings images of a home on the golf course or a home near the kids.  For others, it’s a place to move to when you are no longer able or willing to take care of the home you have lived in for many years.

From Senior Living

How do you know when it’s time to consider senior living?
If performing daily activities is difficult without help from others. Maybe you are no longer able to drive because of loss of vision.

Shopping for yourself is hard because you get fatigued.

Cleaning your home is a task you’re no longer physically able to do.

Or maybe your memory loss has reached a point where you need assistance for safe daily living. You could be living alone and desire the company of others.

Some seniors have no trouble taking care of themselves; they just want to live with their peers in an independent community that is senior-focused.

Let’s look at these lifestyle choices.

  • Independent living communities are places for active, healthy seniors who are able to live on their own.
  • Assisted Living Communities are for seniors who value their independence but who may need some assistance with their daily activities such as meals, dressing, bathing, help with medication and transportation.
  • Nursing Homes are for people who can’t care for themselves but who don’t need a hospital. Resident care can be for chronic conditions or for short term rehabilitative care.
  • Special Care Units are facilities dedicated to dementia and Alzheimer’s patients.

Many of the newer senior living communities offer a range of services, from independent living to special care units.  Before making a move, be sure to check out the facilities personally, obtain a complete list of prices for services, and examine your personal finances to determine if you can afford the facility.  In general, costs go up as you become more dependent and use more of the community’s professional services.   Finding the right retirement community is a very personal decision and often involves other members of the family.

If you have questions, send us a note.

Eight Cheap Cars the Richest Americans Drive

One way to become a millionaire is to save rather than spend.  And one of the big ticket items that people spend money on is cars.

A car is not an investment.  The day it is driven from the dealer’s lot is the day it loses literally thousands of dollars in value.

If you want to get rich, do what rich people do.  And rich people generally do not spend a lot of money on cars.

Here’s an article that was originally published in The Wall Street Journal on cars that rich people drive.

8. Toyota Camry – Average price: $24,237

7. Honda Accord – Average price: $23,168

6. Honda CR-V – Average price: $30,197

5. Volkswagen Jetta – Average price: $25,290

4. Toyota Prius – Average price: $29,762

3. Lexus RX – Average price: $38,561

2. Mercedes C-Class – Average price: $34,064

1. BMW 328  – Average price: $35,146

Note that most rich Americans drive affordable cars. The average price of eight of the cars among the top 10 was less than $40,000. 24/7 Wall St. excluded the two most expensive cars because they are considered luxury models, but by the standard of high-end cars, they cost very little.

Two luxury cars were in the top ten models purchased by the wealthy: the Mercedes E-class and the BMW X5.  But even these cars were at the low end of the price range for luxury models.  Something else rich people do that saves them money on cars: they buy used cars, letting others absorb the rapid depreciation that occurs within the first two years after a new car is purchased.

Sometimes car shopping is so stressful that some clients have asked us to do it for them.  We’re always glad to help.

Pump up your home appraisal

The August 2012 issue of Money Magazine lists four projects that are likely to give you dollar-for-dollar return on your investment.

  • Spruce up landscaping (fill in lawn spots, add shrubbery, tidy borders, mulch).
  • Buy stainless steel appliances (get brands similar to your neighbors).
  • Refinish existing wood floors.
  • Create a walk-in closet.

How to Control Your Heirs From the Grave

An interesting article in the Wall Street Journal describes how trusts can insure that your wishes are carried out after you are gone.

Can you force a grandchild to take a drug test in order to receive an inheritance? Insist your heirs use trust funds only for tuition at your alma mater? Make sure your wife’s future husbands can’t run through money you worked hard to earn?

In many cases, the answer is yes—you can, in effect, control your heirs from the grave.

If you are concerned about the ability of your spouse, children or grandchildren to manage their inheritance, it may be time to meet with a financial planner or an estate planning attorney to see what can be done.  If you don’t have one, we can refer you to professionals we have worked with.

Study found that women are receptive to investment advice.

According to a recent issue of Financial Planning magazine.

About 35% of women report using a financial advisor and another 35% who don’t use an advisor would consider doing so, according to a new survey from Prudential Financial. … The women who do use an advisor generally have higher incomes and are more willing to take on risk to meet their goals. Those willing to consider an advisor also have higher-than-average incomes, and are more likely to have retirement savings.

“Despite their growing earnings power and interest in partnering with a financial professional, women remain relatively underserved by financial professionals,” according to Prudential’s Financial Experience & Behaviors Among Women report. The study surveyed women’s attitudes, behaviors, financial knowledge, goals and confidence in meeting their goals. …


Titles are important in finance.  Titling determines who gets what when the owner of an asset becomes incapacitated or dies.

I met a woman years ago whose husband was in a terrible auto accident that left him in a vegetative state.  The accident was bad enough, but after the accident it was determined that all of the couple’s assets were in her husband’s name.   She had to get a court appointment to act as her husband’s guardian, put up a bond, and provide the court with an accounting of every penny she spent of her husband’s money.

Assets held as joint tenants with right of survivorship (JTWROS) pass to the surviving tenant (usually the spouse) when one of the owners passes on.  This is true even if a will or trust is written specifying someone else should inherit.

IRAs, insurance policies and annuities pass to the named beneficiaries without regard for any other wishes of the decedent.

It is a good idea to review your wills, trusts, beneficiary designations and any changes in your family with your estate planning attorney every few years to make sure that your assets are properly titled and your wishes are honored when you are no longer here.

If you have questions, we’re here to help.

The Roth IRA

A Roth IRA is a retirement account that allows you to save money for your retirement, allows it to grow tax free and be taken out tax free.  The critical difference between a regular IRA and a Roth IRA is the tax when the money is taken out.  With a regular IRA the money that’s taken out is taxed.     Taking money out of a Roth IRA, if you follow the rules, is not taxable.

Here is a good summary of the difference between a regular IRA and a Roth IRA

The biggest difference between the Traditional and Roth IRA is the way the U.S. Government treats the taxes. If you earn $50,000 a year and put $2,000 in a traditional IRA, you will be able to deduct the contribution from your income taxes (meaning you will only have to pay tax on $48,000 in income to the IRS). At 59 1/2, you may begin withdrawing funds but will be forced to pay taxes on all of the capital gains, interest, dividends, etc., that were earned over the past years.

On the other hand, if you put the same $2,000 in a Roth IRA, you would not receive the income tax deduction. If you needed the money in the account, you could withdraw the principal at any time (although you will pay penalties if you withdraw any of the earnings your money has made). When you reached retirement age, you would be able to withdraw all of the money 100% tax free. The Roth IRA is going to make more sense in most situations. Unfortunately, not everyone qualifies for a Roth. A person filing their taxes as single can not make over $95,000. Married couples are better off, with a maximum income of $150,000 yearly.

To learn more about Roth IRAs, contact us.

“Orphan” Retirement Plans

One of the most popular vehicles for retirement saving is the 401(k) (or similar) plan offered by many employers.  When people change jobs they often make one of two errors.

  • They cash the 401(k) out.  This triggers not just a tax, but a 10% penalty for people under 59 ½.  Many people find out that they lose about 40% of their savings to the IRS instead of saving to fund a retirement nest-egg. 

If they don’t cash it out, they make mistake #2:

  • Leave it behind, running on auto-pilot.  There are usually a few options available in 401(k) plans and most people fail to optimize their investment decisions when they put money into them.  The wise choice is to roll the 401(k) over into a Rollover IRA.  This allows you to take advantage of the thousands of investment choices open to IRAs, and get professional investment advice on managing your retirement assets. 

However, this rollover has to be done properly or you could still lose part of your plan to the IRS.  To help you make the proper decisions about your “orphan” 401(k), call a financial professional.

IRA Required Minimum Distribution (RMD)

When you reach age 70 1/2 and have a regular IRA, you are required to begin taking distributions.   The distribution is based on the value of your retirement accounts as of the end of the previous year, divided by a factor supplied by the IRS.  For a quick calculation of your RMD, here is a simple calculator that gives you the answer in seconds.

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