Retirement Plans

Will I Avoid the Social Security Windfall Elimination Provision?

The Windfall Elimination Provision (WEP) applies to Social Security recipients who have their own retirement savings as well as a pension from an employer who did not pay into Social Security.  The purpose of WEP is to disallow for the collection of full Social Security benefits when a retiree has retirement savings and a pension from employers who opted out of Social Security (commonly local government).  Read on to see if you could have your Social Security benefits reduced by the Windfall Elimination Provision.

Have you worked for an employer that did not withhold for Social Security (such as a govt. agency)?

If you have not, then the WEP does not apply to you and will be eligible for full Social Security benefits.  If “yes,” then move on to the next question.

Do you qualify for Social Security benefits from work you did in previous jobs?

If not, then you will not be subject to the WEP.  If you have, move on.

Are you a federal worker in the FERS retirement system and first hired after 12/31/1983?

If you are a federal worker who meets the conditions outlined above, you will not be subject to WEP.  If you are not a federal worker or are a federal worker and do not meet the above conditions, you may be subject to the Windfall Elimination Provision.

The Social Security Windfall Elimination Provision is complicated and has a large influence on your retirement situation should it affect you.  Check out this flowchart to learn more.

If you would like to schedule a call to talk the Social Security Windfall Elimination Provision to see if it affects you, please give us a call at 303-440-2906 or click here here to schedule a time to speak with us.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Will My Roth IRA Conversion be Penalty-Free?

There are several situations in which a Roth Conversion could benefit your future tax situation.  Whether you have lower income this year or want to take advantage of low tax rates, you will want to make sure you avoid any penalties.  Let’s take a look:

Are you converting a Traditional IRA?

If your answer is “yes”, move on to the next question.  If you are converting a SIMPLE IRA, the answer is a bit more complicated depending on how long you have had the Simple IRA.  Check out our chart to learn more.

Are you expecting to take a distribution within 5 years of your conversion?

If you are far from retirement, then your answer to this will likely be “no”, then you can convert any amount.  Remember that any conversion amount is taxed as ordinary income and could increase your Medicare Part B & D premiums.  If you plan to take distributions within 5 years and are under 59.5, you may be subject to a penalty. If you are taking Required Minimum Distributions then you will have to take your RMD before any conversion.

Advantages of a Roth IRA

Roth IRA’s are particularly advantageous if there are changes (increases) in tax rates. Here are ways you could be subject to higher taxes in the future.

1.      The Government raises tax rates.

2.      One spouse passes away and now you are subject to single rates instead of married rates. When a spouse passes away, your expenses are not cut in half but the brackets are cut in half.

3.      Your expenses dramatically increase because you are in an assisted living facility or a nursing home.

If you’ve made it this far, there is a good chance you can make a Roth IRA conversion penalty-free.  Check out this flowchart to learn more.

If you would like to schedule a call to talk about the best strategy for converting a IRA to a Roth IRA, give us a call at 303-440-2906 or click here to schedule a time to speak with us.

Should I Inherited My Deceased Spouse’s IRA?

When a spouse is the beneficiary of the IRA of their deceased spouse’s IRA, there are several options available. Each option has its own advantages, depending on the needs of the surviving spouse.  Read below to see which option benefits you best.

Are you the sole beneficiary to your spouse’s Traditional IRA?

If you are not the sole beneficiary, your situation is a bit more complicated.  Check out our “Can I Delay the RMD from the Traditional IRA I Inherited?” flowchart here If you are the sole beneficiary, move on to the next question.

What best describes your situation:

You plan to use all the assets in five years

Consider electing the 5 year rule if you expect significant expenses over the next five years that will deplete the account.  This allows you to take distributions at any time over the next five years of any amount, provided the account is depleted at the end of five years.  Keep in mind you will need to pay ordinary income tax on all distributions in the year they are taken.

You want income and are younger than 59.5 years old

Consider inheriting the IRA, which will allow you to take distributions from the IRA penalty-free.  You will be required to take RMDs based on the IRS Single Life Expectancy table.  Of course, you can take any amount of distributions that you need as long as the distribution is greater than or equal to the RMD.

You don’t want income and/or are younger than your deceased spouse

Consider rolling over the IRA into your own IRA.  This will allow you to avoid taking RMDs until the year after you turn 70.5.  If needed, you can take distributions as soon as you hit 59.5.

 

There are a lot of factors to consider when deciding which option is best for you.  Check out this flowchart to learn more.

If you would like to schedule a call to talk about the best strategy for an IRA you have inherited, give us a call at 303-440-2906 or click here to schedule a time to speak with us.

 

 Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

Buy-Sell Agreements

20-plus issues for every closely held business owner to consider


Key Takeaways:

  • Buy-sell agreements come in three basic forms but must be individually tailored to suit the specific needs of your business.

  • Make sure the agreement meets your ongoing needs, including tax, retirement, insurance and funding issues.

  • Without appropriate “exit” plans in place, ownership changes can be worse than Hollywood divorces—bitter, expensive and devastating to all involved.



Almost all owners of closely held businesses put all of their time, effort and money into launching and growing their businesses. Tragically, they put little effort into protecting what they have built from devastation caused by one or more of the owners leaving the business. Without an appropriate “exit” plan in place, changes in business ownership can be worse than a Hollywood divorce—bitter, expensive and devastating to all involved.

Don’t be fooled! Changes in ownership happen every day in all types of businesses for a multitude of reasons: death, retirement, disability, divorce, voluntary and involuntary termination of employment, lawsuits, financial and economic setbacks, bankruptcy, and selling and gifting interests, just to name a few. The disruptions caused by these events usually result in severe financial consequences for everyone involved, including collateral damage to customer, supplier, banking and employee relationships as well as to long-term company goodwill.

Consider a buy-sell agreement from Day One


Perhaps the biggest tragedy is that most, if not all, of the aforementioned problems can be avoided by putting a well-drafted buy-sell agreement in place right from the start. That’s when all the owners are still in the “honeymoon” stage of the business and relations are most amicable. However, it is never too late to put a buy-sell agreement in place, and some honest thought and open communication will strengthen and protect the business and bring peace of mind to everyone involved. Remember, ownership changes are bound to happen, but having a plan in place to deal with those changes will always smooth out the road ahead.

Next steps


Now that you are convinced that a buy-sell plan is critical for the health and well-being of both the business and the individual business owners, where do you go from here? First, consult with an experienced business lawyer who can walk you through the process and help craft a plan that fits the specific needs of both the business and the individual owners. Second, understand that no two agreements are ever the same, although they generally fall into one of three categories:

1.      Cross-Purchase Agreements, which can be ideal for a business with a small number of owners. When a triggering event occurs, the remaining owners directly purchase the departing owner’s interests in the business.

2.      Stock Redemption Agreements, which can be simpler and easier to structure. Generally they can be better-suited for entities with more owners. With these types of agreements the entity purchases the ownership interests of the departing owner. The remaining owners receive an increase in the value of their interests, not in the number of interests they own.

3.      Hybrid Agreements, which are a combination of cross-purchase agreements and redemption agreements. Generally the entity has the obligation to redeem the interest of the departing owner, but the remaining owners have the option of directly purchasing the departing owner’s interests if the entity is unwilling or unable to do so.

In order to determine which type of agreement will best suit your needs, consider the following issues:

  1. How many owners does the business have today and will have in the future?

  2. Is the business family-owned or are third parties involved?

  3. What type of business is involved, and are there specific issues that need to be addressed relating to the entity’s business, such as professional licensing or trade issues?

  4. What is the legal structure of the business: corporation, S corporation, partnership, limited liability company?

  5. What is the age and health status of each business owner?

  6. Is each of the owners insurable?

  7. What percentage of the business does each owner hold?

  8. What is the value of the business, and how is that value determined?

  9. What are the tax implications of each type of agreement?

  10. What are the transfer implications of each type of agreement?

  11. What restrictions will be put on the transfer of interests?

  12. Will the interests be subject to rights of first refusal?

  13. How will the business be valued and the purchase price determined? How often will the business be revalued? Will the interests be valued differently depending on the specific transfer event?

  14. Will there be penalty provisions for violating the terms of the agreements and/or conduct damaging the business?

  15. How will the transfer of interests be funded? Will insurance such as life insurance and disability insurance be mandated, and if so, how will premiums be paid?

  16. How will the transfers be paid, all upfront or over time? If the payments are over time, what are the terms and the arrangements to secure payment?

  17. Is the agreement aligned with other important legal documents such as the entity organizational documents, employment agreements, business agreements and contracts, banking agreements, and the estate planning documents of the individual owners?

  18. Coordinate the agreement with related property that may be owned by each of the business owners. Examples include affiliated businesses, insurance policies, land and personal property, intellectual property, and leases.

  19. How will termination of the business be handled?

  20. How often will the agreement be reviewed? Doing so annually is a good idea.

  21. How will disputes related to the agreement be handled—litigation, mediation or arbitration?

The foregoing is not a complete checklist of every issue that needs to be considered, but it will give you a good platform to begin discussions between you and your legal counsel.

Conclusion


First, properly structured buy-sell agreements are critical to the survival of any closely held business; they are not an option. Second, these agreements must be tailored to the specific needs of the business. One size doesn’t fit all. Finally, businesses and relationships constantly change; consequently, buy-sell agreements must be reviewed and updated regularly. An out-of-date agreement is next to worthless.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.



Life Never Stops Changing

Neither do your giving and financial decisions


Key Takeaways

·         The most impactful gifts are often the result of personal tragedy or triumph.

·         We spend so much of our lives in the wealth accumulation phase that it’s easy to forget the positive impact that our money can have on others.

·         An astute advisor not only helps you optimize your investments, cash flow and wealth protection, but your legacy as well.

Meetings with your financial advisors bring to mind thoughts of balance sheets, net worth statements, stock options, investments, insurance policies and employee benefits. While these documents tell your various advisors what you have, they don’t tell them who you are, what you want or what truly motivates you.

I’ve learned over the years that after gaining a client’s trust, and after carefully opening the door to their personal side, we find out what truly makes them tick and what shapes the lens from which they see the world.

Often we come across tremendous stories of tragedy and triumph (or both). These are pivotal moments in an individual’s background – typically turning into a focus for future action. And sometimes that action is philanthropic – one that highlights the triumph or attempts to solve the problem that caused the tragedy.

For instance, a daughter’s death at the hands of a drunk driver left a family with such a need for a voice that Mothers Against Drunk Driving (M.A.D.D.) was brought into existence. Today, M.A.D.D. is the largest advocacy group in the country focused on preventing individuals from driving while intoxicated – its existence motivated by a heartbreaking loss.

Everyone deals and reacts to adversity in their own way – we must understand and accept that.

While tragedy is one side of the equation, there are also triumphs to celebrate – easier to discuss and just as big a motivation. Many years ago I worked with an extremely wealthy individual who kept telling me that he wasn’t charitable and that he didn’t really care about much of anything. He went on at length about how he was “self-made” and had come from nothing.

It wasn’t until when he revealed that he’d been raised in an orphanage that I realized how critical the orphanage had been to his upbringing and success. Today, that orphanage is endowed by a large gift by my client. It not only represents his personal victory, but an acknowledgment to the people who helped him triumph over his circumstances.

For some, it may be a coach, teacher or program that launches a successful athletic or academic career. It may be the person who helped you discover that you were good at math or the person who took the time to elicit your musical genius when no one else could see it. By doing so, we may discover a desire to make a gift, to return the favor, to pay it forward.

Life Never Stops Changing

Change is an inevitable part of life. We start new jobs, we send kids off to college, we lose a parent or gain a grandchild. Change can be daunting – but viewed through a different lens, it presents opportunity to raise the important questions about philanthropy.

In many circumstances, philanthropy can be the best solution to the change that’s taking place – if only we think to ask our advisors how.

Let’s look at some major life changes and see where you and your advisor might discuss gift opportunities at the appropriate time.

Suppose you are approaching retirement. Let’s assume you are the major breadwinner of your household and you are also hoping to downsize. As ordinary income (your paycheck) ceases, the desire to convert dormant or low yielding assets into supplemental income normally increases. This may be an opportunity to reposition low-basis assets into a pooled income fund (PIF), a charitable remainder trust (CRT) or even a gift annuity. Furthermore, the downsizing might free up additional capital with which to consider similar split interest gifts.

The birth of a grandchild may inspire a fund for college education. You can go the traditional 529 route or consider certain types of CRTs that turn into income in 18 years.

Widowhood is another significant life change that triggers emotional and financial upheaval, and often changes to family dynamics. If your late spouse was the main financial decision maker in your relationship, you may feel lost and frightened about the future. Perhaps the best solution is simplification and consolidation – taking multiple accounts and creating one large gift annuity, charitable trust or pooled income fund that delivers quarterly income. You should also examine gifts such as life estate agreements – which relieve the children of dealing with a house they usually don’t want anyway.

A serious illness is another major life change that brings a host of emotional and financial worries. But as you and your family delve into researching your loved one’s illness and treatment options, it can also motivate giving to support further research into curing or ameliorating that illness or disease.

Change is everywhere and change is constant. While some changes go unnoticed, others represent a prime turning point in our lives. We spend so much of our lives in the wealth accumulation phase that we sometimes forget the power our wealth can have to make lives better for others.

Conclusion

Just as an astute advisor can help you optimize your investments, cash flow and wealth protection strategies, he or she can also help you optimize the power of your giving.

All you have to do is email us or give us a call.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

 

Will My Roth IRA Conversion be Penalty-Free?

There are several situations in which a Roth Conversion could benefit your future tax situation.  Whether you have lower income this year or want to take advantage of low tax rates, you will want to make sure you avoid any penalties.  Let’s take a look:

Are you converting a Traditional IRA?

If your answer is “yes”, move on to the next question.  If you are converting a SIMPLE IRA, the answer is a bit more complicated depending on how long you have had the Simple IRA.  Check out our chart to learn more.

Are you expecting to take a distribution within 5 years of your conversion?

If you are far from retirement, then your answer to this will likely be “no”, then you can convert any amount.  Remember that any conversion amount is taxed as ordinary income and could increase your Medicare Part B & D premiums.  If you plan to take distributions within 5 years and are under 59.5, you may be subject to a penalty. If you are taking Required Minimum Distributions then you will have to take your RMD before any conversion.

Advantages of a Roth IRA

Roth IRA’s are particularly advantageous if there are changes (increases) in tax rates. Here are ways you could be subject to higher taxes in the future.

1.      The Government raises tax rates.

2.      One spouse passes away and now you are subject to single rates instead of married rates. When a spouse passes away, your expenses are not cut in half but the brackets are cut in half.

3.      Your expenses dramatically increase because you are in an assisted living facility or a nursing home.

If you’ve made it this far, there is a good chance you can make a Roth IRA conversion penalty-free.  Check out this flowchart to learn more.

If you would like to schedule a call to talk about the best strategy for converting a IRA to a Roth IRA, give us a call at 303-440-2906 or click here to schedule a time to speak with us.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Will My Social Security Benefit be Reduced?

Social Security has been undergoing changes due to funding concerns, and it looks like there may well be more in the future.  This leads to many of our clients asking us “Will I receive the Social Security benefits we planned for?”  Let’s take a look:

At what age can you collect Social Security?

For anyone born in 1960 or after, your Full Retirement Age (FRA) is 67.  If you were born before 1960, you will be eligible for a full Social Security benefit between 66-67 years old, depending on your birth year. 

Can you collect benefits on your own work history?

The answer for most people is yes, but it depends on how long you have been in the workforce.  If you haven’t paid into Social Security for at least 10 years, your benefits will be reduced. 

Special Situations

If you are married and don’t have a work history see the “Am I Eligible for Social Security Benefits as a Spouse?” flowchart.

If you are widowed see the “Am I Eligible for Social Security Benefits as a Surviving Spouse?” flowchart.

If you are divorced see the “Am I Eligible for Social Security Benefits as a Divorced Individual?” flowchart.

At what age will you start taking Social Security?

As discussed above, the Full Retirement Age is typically around 67 years old.  You can, however, elect to start Social Security as early as 62 or as late as 70.  The later you postpone your benefits, the larger your monthly check will be going forward.  To learn more about how much benefits you can expect to receive, and how you can increase your Social Security payout during retirement, check out our chart here.

If you would like to schedule a call to talk about the best strategy for taking Social Security, give us a call at 303-440-2906 or click here to schedule a time to speak with us.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Is a Cash Balance Plan Right for You? Part 1

Key questions to consider before pulling the trigger

By Robert J. Pyle, CFP®, CFA


You’ve worked incredibly hard to build your business, medical practice or law practice. But, despite enjoying a robust income and the material trappings of success, many business owners and professional are surprised to learn that their retirement savings are way behind where they need to be if they want to continue living the lifestyle to which they’ve become accustomed.

In response, many self-employed high earners are increasingly turning to Cash Balance Plans (CBPs) in the latter stages of their careers to dramatically supplement their 401(k)s—and their staffs’ 401(k)s as well. Think of a CBP as a supercharged (and tax advantaged) retirement catchup program. For a 55-year-old, the CBP contribution limit is around $265,000, while for a 65-year-old, the CBP limit is $333,000—more than five times the ($62,000) limit they could contribute to a 401(k) this year.

Boomers who are sole proprietors or partners in medical, legal and other professional groups account for much of the growth in CBPs. For many older business owners, the tax advantages that come with plowing six-figure annual contributions into the CBPs far outweigh the costs.


As I wrote in my earlier article: CBPs: Offering a Break to Successful Doctors, Dentists and Small Business Owners, CBPs can offer tremendous benefits for business owners and professionals who own their own practices….especially if they’re in the latter stages of their careers. There are just some important caveats to consider before taking this aggressive retirement catchup plunge.


CBPs benefit your employees as well


Business owners should expect to make profit sharing contributions for rank-and-file employees amounting to roughly 5 percent to 8 percent of pay in a CBP. Compare that to the 3 percent contribution that's typical in a 401(k) plan. Participant accounts also receive an annual "interest credit," which may be a fixed rate, such as 3-5 percent, or a variable rate, such as the 30-year Treasury rate. At retirement, participants can take an annuity based on their account balance. Many plans also offer a lump sum that can be rolled into an IRA or another employer's plan.

Common retirement planning mistakes among successful doctors


Three things are pretty common:

1) They’re not saving enough for retirement.

2) They’re overconfident. Because of their wealth and intellect, doctors get invited to participate in many “special investment opportunities.” They tend to investment in private placements, real estate and other complex, high-risk opportunities without doing their homework.
3) They feel pressure to live the successful doctor’s lifestyle. After years of schooling and residency, they often feel pressure to spend lavishly on high-end cars, homes, private schools, country clubs and vacations to keep up with other doctors. There’s also pressure to keep a spouse happy who has patiently waited and sometimes supported them, for years and years of medical school, residency and further training before the high income years began.

Common retirement planning mistakes among successful dentists


Dentists are similar to doctors when it comes to their money (see above), although dentists tend to be a bit more conservative in their investments. They’re not as likely to invest in private placements and real estate ventures for instance. Like doctors, dentists are often unaware of how nicely CBPs can set them up in their post-practicing years. They’re often not aware that they have retirement savings options beyond their 401(k)…$19,000 ($25,000 if age 50 and over). For instance, many dentists don’t realize that with a CBP they could potentially contribute $200,000 or more. It’s very important for high earning business owners and medical professionals to coordinate with their CPA who really understands how CBPs work and can sign off on them.

Common objections to setting up a CBP

First, the high earning professional or business owner must commit to saving a large chunk of their earnings for three to five years—that means having the discipline not to spend all of their disposable income on other things such as expensive toys, memberships, vacations and other luxuries.

Another barrier they face is a reluctance to switch from the old way of doing things to the new way. Just like many struggle to adapt to a new billing system or new technology for their businesses or practices, the same goes for their retirement savings. Because they’re essentially playing retirement catchup, they’re committing to stashing away a significant portion of their salary for their golden years. It can “pinch” a little at first. By contrast, a 401(k) or Simple IRA  contribution is a paycheck “deduction” that they barely notice.

A CBP certainly has huge benefits, but it requires a different mindset about savings and it requires more administration and discipline, etc. However, if you have a good, trustworthy office administrator or if you have a 401(k) plan that’s integrated with your payroll, then that can make things much easier. It’s very important to have a system that integrates payroll, 401(k) and CBP. That can simplify things tremendously. For example, 401(k) contributions can be taken directly out of payroll and CBP contributions can be taken directly out of the owner/employer’s bank account.

Before jumping headfirst into the world of CBPs, I recommend that high earning business owners and professional rolling it out in stages over time.

1. Start with a SIMPLE IRA.
2. Then move to 401(k) plan that you can max out--and make employee contributions.

3. Add a profit sharing component for employees which typically is in the 2% range and this will usually allow you to max out at $56,000 (under 50) or $62,000 (age 50 and over)
4.  Once comfortable with the mechanics of a 401(k) and profit sharing, then introduce a CBP.


Conclusion

If you’re behind in your retirement savings, CBPs are an excellent tool for supercharging the value of your nest egg and can possibly allow you to retire even sooner than you thought. CBPs take a little more set-up and discipline to execute, but once those supercharged retirement account statements start rolling in, I rarely find a successful owner or professional who doesn’t think the extra effort was worth it.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 


Am I eligible for a Qualified Business Income (QBI) Deduction?

Due to recent tax law changes effective 2018, many are left in a state of confusion about what tax credits or deductions their business may qualify for.  For business owners, the Qualified Business Income deduction is one of the most advantageous new deductions available to them.  It allows for qualified businesses to deduct up to 20% of their income, reducing their tax bill by a considerable margin.  What makes a business a “Qualified Business?”

There are a several requirements to qualify for the QBI deduction.  Could your business be qualified for these tax deductions?  Read on to find out:

Staying Organized and Financial Planning Are Keys to Success

11 tactics to make this your best year ever

Key Takeaways:

·         The beginning of a new year is a particularly good time for you and your family to review finances and to update financial plans.

·         Staying organized and planning finances are lifelong processes, and the keys to reaching and maintaining financial success.

·         Sensible financial management is more than budgeting and saving for retirement. It’s about being ready to handle a lifetime of financial challenges, needs and changes.

Happy New Year to you and your family!

The beginning of a new year is a good time to review your finances and update financial strategies and plans. This year is especially important as financially challenging times continue for many individuals and businesses, rich and poor, big and small.

Even if the 2017 Tax Cut and Jobs Act (TCJA) had not been passed, most would say that managing their personal finances is more complicated and more important than ever before. We’re living longer, but saving proportionately less. Many of us feel less secure in our jobs and homes than we did in the past. We see our money being drained by the high cost of housing, taxes, education and health care. We worry about the future, or unfortunately, in too many cases, we simply try not to think about it.

More than simply budgeting and saving

Sensible financial management means much more than budgeting and putting money away for retirement. It means being equipped to handle a lifetime of financial challenges, needs and changes; figuring out how to build assets and staying ahead of inflation; taking advantage of deflation; and choosing wisely from a constantly widening field of savings, investment and insurance options. When it comes to finances, you are faced with more pressures and more possibilities than ever before.

The good news is that as complex as today’s financial world is, there’s no real mystery to sound personal money management. What you need is a solid foundation of organization and decision-making, plus the willingness to put those two things into action. I’ll talk about those core principles in just a minute.

Effective financial management involves certain procedures that you don’t usually learn from your parents or friends—and unfortunately they aren’t currently taught in our schools. It’s more than just a matter of gathering enough information and then making a logical decision. In fact, for many people, the constant barrage of economic news, fragmented financial information and investment product advertisements is part of the problem. Information overload can be a major obstacle to sorting out choices and making wise decisions.

The Financial Awareness Foundation, a California-based not-for-profit organization developed a simple personal financial management system that’s designed to help you save time and money, while providing a systematic approach to help you better manage finances. The key is to stay organized, remain aware of money issues, and make deliberate choices about ways to spend, save, insure and invest your assets. That’s so much smarter than simply following your emotions or “going with the flow.”

Getting organized

1. Paperwork. Everyone has primary financial documents—birth certificates, marriage certificates, current year net-worth statement, retirement plan beneficiary statements, deeds of trust, certificates of vehicle title, last three tax returns, gift tax returns, insurance policies, wills, trusts, powers of attorney, passwords, digital paperwork, etc. Organize this information and keep it in a safe central location that ties into your paper and digital filing systems.

2. Net Worth. Know where you stand by inventorying what you own and what you owe. The beginning of a new year is an excellent time to do this, but you can do it any time. Just be sure to do this personal inventory at least once a year.

3. Cash Flow. Gain control of cash flow by spending according to a plan, not spending impulsively.

4. Employment Benefits. Make sure you fully understand employee benefits (the “hidden paycheck”) at your company. Maximize any dollar amounts that your employer contributes toward health insurance, life insurance, retirement plans and other benefits.

Financial planning

5. Goal Setting. Before you begin the financial planning process, ask yourself what’s really important to you financially and personally. These are key elements of planning for your future; they affect your options, strategies and implementation decisions.

6. Financial Independence and Retirement Planning. A comfortable retirement, perhaps at an early age, is one of the most common reasons people become interested in financial planning. Determine how much money is a reasonable nest egg to reach and maintain your financial independence. Then work with your advisors to determine the right strategy to make that goal a reality.

7. Major Expenditures Planning. A home, a car, and a child’s or grandchild’s college education—these are all big-ticket items that are best planned for in advance. Develop sound financial strategies early on for effectively achieving the funding you need for those big bills down the road.

8. Investments Planning. For most of us, wise investing is the key to achieving and maintaining our financial independence as well as our other financial goals. Establish and refresh investment goals, risk tolerance and asset allocation models that best fit your situation.

9. Tax Planning. Your financial planning should include tax considerations, regardless of your level of wealth. Proactively take advantage of opportunities for minimizing tax obligations.

10. Insurance Planning. Decide what to self-insure and which risks to pass off to insurance companies—and at what price you’re willing to do so.

11. Estate Planning. Develop or update your estate plan. If you get sick or die without an up-to-date estate plan, the management and distribution of assets can become a time-consuming and costly financial challenge for loved ones and survivors.

It is estimated that over 120 million Americans do not have up-to-date estate plans to protect themselves and their families. This makes estate planning one of the most overlooked areas of personal financial management. Estate and financial planning is not just for the wealthy; it is an important process for everyone. With advance planning, issues such as guardianship of children, management of bill-paying and assets—including businesses and practices—care of a child with special needs or a parent, long-term care needs, wealth preservation, and distribution of retirement assets can all be handled with sensitivity and care and at a reasonable cost.

Conclusion

Staying organized and planning wisely are the keys to financial success. Short of winning the lottery or inheriting millions, few people can attain and maintain financial security without some forethought, strategy and ongoing management. The beginning of a new year is an excellent time for you and your family to review finances and update financial plans.


Let’s have a great 2019!

 Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

Optimizing Your Capital Gain Treatment Part 2

It’s a new world. When it comes to carried interest, real estate and collectibles, carefully document your purpose for holding these assets

Key Takeaways:

  • Long-term capital gains associated with assets held over one year are generally taxed at a maximum federal rate of 20 percent — not the top ordinary rate of 37 percent.

  • Just be careful if you are planning to sell collectibles, gold futures or foreign currency. The tax rate is generally higher.

  • The more you can document your purpose for holding your assets (at the time of purchase and disposition), the better your chances of a favorable tax result.

  • The deductibility of net capital losses in excess of $3,000 is generally deferred to future years.

There’s no shortage of confusion about the current tax landscape—both short-term and long term—but here are some steps you can take to protect yourself from paying a higher tax rate than necessary as we march into a new normal world.

 

Carried Interest

The Tax Cuts and Jobs Act lengthens the long-term holding period with respect to partnership interests received in connection with the performance of services. Profit interests held for three years or less at the time of disposition will generate short-term capital gain, taxed at ordinary income rates, regardless of whether or not a section 83(b) election was made. Prior law required a holding period greater than one-year to secure the beneficial maximum (20%) federal long-term capital gain tax rate.

Real estate

Real estate case law is too technical for the purposes of this article. Let’s just say the courts look at the following factors when trying to determine a personal real-estate owner’s intent:

  • Number and frequency of sales.

  • Extent of improvements.

  • Sales efforts, including through an agent.

  • Purpose for acquiring, holding and selling.

  • Manner in which property is acquired.

  • Length of holding period.

  • Investment of taxpayer’s time and effort, compared to time and effort devoted to other activities.

Unfortunately, the cases do not lay out a consistent weighting of these general factors. Always check with your legal and tax advisors before engaging in any type of real-estate transaction.


Collectibles

Works of art, rare vehicles, antiques, gems, stamps, coins, etc., may be purchased for personal enjoyment, but gains or losses from their sale are generally taxed as capital gains and losses. But, here’s the rub: Collectibles are a special class of capital asset to which a capital gain rate of 28 percent (not 20%) applies if the collectible items are sold after being held for more than one year (i.e. long-term).

Note that recently popular investments in gold and silver, whether in the form of coins, bullion or held through an exchange-traded fund, are generally treated as “collectibles” subject to the higher 28 percent rate. However, gold mining stocks are subject to the general capital gains rate applicable to other securities. Gold futures, foreign currency and other commodities are generally subject to a blended rate of capital gains tax (60 percent long-term, 40 percent short-term).

Bitcoin and other cryptocurrencies are treated as “property” rather than currency and will trigger long-term or short-term capital gains when the funds are sold, traded or spent. Cryptocurrencies are NOT classified as collectibles.

The difficulties arise if you get to the point that you are considered a dealer rather than a collector, or if you are a legitimate dealer but start selling items from your personal collection. In most cases, the following factors in determining whether sales of collectibles result in capital gain or ordinary income:

  • Extent of time and effort devoted to enhancing the collectible items

  • Extent of advertising, versus unsolicited offers

  • Holding period and frequency of sales from personal collection

  • Sales of collectibles as sole or primary source of taxpayer’s income

The Tax Cuts and Jobs Act, will end any further discussion about whether gain on the sale of collectibles can be deferred through the use of a like-kind exchange. The tax bill limits the application of section 1031 to real property disposed of after December 31, 2017.

Recommended steps to preserve capital gain treatment:

  • Clearly identify assets held for investment in books and records, segregating them from assets held for sale or development.

  • In the case of collectibles, physically segregate and document the personal collection from inventory held for sale.

  • Memorialize the reason(s) for a change in intent for holding: e.g., death or divorce of principals, legal entanglements, economic changes or new alternate opportunities presented.

  • If a property acquired with the intent to rent is sold prematurely, then retain documentation that supports the decision to sell: e.g., unsuccessful marketing and advertising, failed leases, news clippings of an adverse event or sluggish rental market.

  • If a property is rented out after making substantial improvements, then document all efforts to rent, and list or advertise it for sale only after a reasonable period of rental.

  • Consider selling appreciated/unimproved property to a separate entity before undertaking development. This would necessitate early gain recognition, but may preserve the capital gain treatment on the appreciation that’s realized during the predevelopment period.

  • Consider the application of Section 1237, a limited safe harbor, permitting certain non-C Corporation investors to divide unimproved land into parcels or lots before sale, without resulting in a conversion to dealer status.

Conclusion

Characterizing an asset as ordinary or capital can result in a significant tax rate differential. It can also affect your ability to net gains and losses against other taxable activities. So you must spend the time and effort needed to document the intent of the acquisition of an asset, as well as any facts that might change the character of the asset, during the holding period.

Sure, we’re all busy. But, in today’s new regulatory and tax landscape, don’t you think it’s worth taking the time to do so in order to potentially cut your future tax rate in half?

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

Withdrawal Strategies: Tax-Efficient Withdrawal Sequence

Key Takeaways:

  • Retirees’ portfolios may last longer if they incur the least amount of income tax possible over their retirement period.

  • Retirees should focus on minimizing the government’s share of their tax-deferred accounts.

  • Make sure your advisor is helping you select the appropriate dollar amount and the appropriate assets to liquidate in order to fund your retirement lifestyle.

Asset Placement Decision

A winning investment strategy is about much more than choosing the asset allocation that will provide the greatest chance of achieving one’s financial goals. It also involves what is called the asset location decision. Academic literature on asset location commonly suggests that investors should place their highly taxed assets, such as bonds and REITs, in tax-deferred accounts and place their tax-preferred assets, such as stocks, in taxable accounts.

In general, your most tax-efficient equities should be held in taxable accounts whenever possible. Holding them in tax-deferred accounts can result in the following disadvantages:

  • The potential for favorable capital gains treatment is lost.

  • The possibility of a step-up in basis at death for income tax purposes is lost.

  • For foreign equities, foreign tax credit is lost.

  • The potential to perform tax-loss harvesting is lost.

  • The potential to donate appreciated shares to charities and avoid taxation is lost.

Asset location decisions can benefit both your asset accumulation phase and retirement withdrawal phase. During the withdrawal phase, the decision about where to remove assets in order to fund your lifestyle should be combined with a plan to avoid income-tax-bracket creeping. This will ensure that your financial portfolio can last as long as possible.

Tax-Efficient Withdrawal Sequence

Baylor University Professor, William Reichenstein, PhD, CFA wrote a landmark paper in 2008 that’s still highly relevant today. It’s called: Tax-Efficient Sequencing of Accounts to Tap in Retirement. It’s fairly technical, but it provides some answers about the most income-tax-efficient withdrawal sequence to fund retirement that are still valid today. According to Reichenstein, “Returns on funds held in Roth IRAs and traditional IRAs grow effectively tax exempt, while funds held in taxable accounts are usually taxed at a positive effective tax rate.”

Reichenstein also noted that only part of a traditional IRA’s principal belongs to the investor. The IRS “owns” the remaining portion, so the goal is to minimize the government’s share, he argued.

Tax-Efficient Withdrawal Sequence Checklist

In our experience, retirees should combine the goal of preventing income-tax-bracket creeping over their retirement years with the goal of minimizing the government’s share of tax-deferred accounts.

To achieve this goal, the dollar amount of non-portfolio sources of income that are required to be reported in the retiree’s income tax return must be understood. These income sources can include defined-benefit plan proceeds, employee deferred income, rental income, business income and required minimum distribution from tax-deferred accounts. Reporting this income, less income tax deductions, is the starting point of the retiree’s income tax bracket before withdrawal-strategy planning.

The balance of the retiree’s lifestyle should be funded from his or her portfolio assets by managing tax-bracket creeping and by lowering the government ownership of the tax-deferred accounts. The following checklist can assist the retiree in achieving this goal:

  1. Avoid future bracket creeping by filling up the lower (10% and 12%) income tax brackets by adding income from the retiree’s tax-deferred accounts.

  2. If the retiree has sufficient cash flow to fund lifestyle expenses but needs additional income, convert traditional IRAs into Roth IRAs to avoid tax-bracket creeping in the future. This will also allow heirs to avoid income taxes on the inherited account balance.

  3. Locate bonds in traditional IRAs rather than in taxable accounts. This will reduce the annual reporting of taxable interest income on the tax return.

  4. Manage the income taxation of Social Security benefits by understanding the amount of reportable income based on the retiree’s adjusted gross income level.

  5. Liquidate high-basis securities rather than low-basis securities to fund the lifestyle for a retiree who needs cash but is sensitive to additional taxable income.

  6. Aggressively create capital losses when the opportunity occurs to carry forward to future years to offset future capital gains.

  7. Allow the compounding of tax-free growth in Roth IRAs by deferring distributions from these accounts.

  8. Consider a distribution from a Roth for a year in which cash is needed but the retiree is in a high income tax bracket.

  9. Consider funding charitable gifts by transferring assets from a traditional IRA directly to the charity. This avoids the ordinary income on the IRA growth.

  10. Consider funding charitable gifts by selecting low-basis securities out of the taxable accounts in lieu of cash. This avoids capital gains on the growth.

  11. Manage capital gains in taxable accounts by avoiding short-term gains.

Conclusion

You and your advisor should work together closely to make prudent, tax-efficient withdrawal decisions to ensure your money lasts throughout your retirement years. Contact us any time if you have questions about your retirement funding plans or important changes in your life circumstances.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

 

New Retirement Plan Contribution Limits for 2019

By Robert J. Pyle, CFP®, CFA


Key Takeaways

·         Good news for workers: The 401(k) contribution ceiling has been raised $19,000 in 2019 ($25,000 if over age 50).

·         IRA and Roth holders can now contribute up to $6,000 per year ($7,000 if over age 50).

·         The contribution caps have been raised even higher for the self-employed.

·         See handy charts below for paycheck-by-paycheck breakdown.

 

While talk of Social Security’s demise may be exaggerated, there’s a very real possibility that many Americans won’t receive the full amount of benefits they’re expecting in retirement. Further, you don’t know how long you will live or what your true living costs will be in retirement—especially when unpredictable medical/eldercare costs are factored in.

Bottom line: It makes sense to save as much as you possibly can in tax-deferred retirement plans regardless of whether you are a salaried employee or a business owner. The rules are on your side.


Good news on the 401(k) front

The contribution limit for 401(k)s increases to $19,000 in 2019, up from $18,500 in 2018. Workers over age 50 in 2019 can make an additional $6,000 per year in catchup contributions, meaning you can now contribute up to $25,000 per year in tax-deferred retirement accounts. To put that sum into more realistic terms, many find it helpful to see what they can contribute on a paycheck by paycheck basis. Here’s a handy chart, based on monthly, semi-monthly or every- two-week paycheck cycles:

Capture 1.JPG

If you are over age 50, here’s how the additional $6,000 catchup contribution looks broken down by paycheck frequency:

Capture2.JPG

IRA contribution ceiling also raised

There’s good news on the Individual Retirement Account (IRA) front as well. The IRA and Roth IRA limits have both increased by $500 in 2019. If you have an IRA, you can now contribute up to $6,000 per year, or $7,000 per year if you are over age 50. The same contribution limits of $6,000/$7,000 apply for a Roth IRA. Remember if you are over age 70-1/2, you can still contribute to a Roth IRA if you have generated earned income and if your adjusted gross income is below the eligibility threshold. You have until April 15th, 2019 to contribute for 2018 and until April 15th, 2020 to contribute for 2019. If you contribute early in the year, you will have your money working for you for a longer period of time.

Business owners can contribute more as well

If you are self-employed, the SEP IRA and solo 401(k) limits have been raised to $56,000 for 2019. In addition, if you are over 50 and have a solo 401(k), you can make an additional $6,000 in catch-up contributions for a total of $61,000. Just remember: if you want to set up an individual 401(k), you must do so by December 31st, 2018.

Conclusion

In today’s instant gratification world, it can be hard to set aside funds for the future. But, whether you are young or old, salaried employee or solopreneur, the tax advantages and compounding power of 401(k), IRAs and SEPs are just too attractive to ignore. You may not get same day shipping or bonus miles with tax-deferred retirement savings plans, but having peace of mind throughout your golden years is something you just can’t put a price tag on.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.


Solve the Self-Employed Retirement Dilemma

 

Solve the Self-Employed Retirement Dilemma

Here’s how to figure out the best retirement plan for your situation

The challenges of self-employment seem endless. You are your own chief marketing officer, chief financial officer, chief executive and junior assistant. With all of the roles you play, it’s no wonder that you haven’t spent much time planning for retirement.

The good news is that the right retirement plan can address more than just your retirement—it can help lower your taxes and reduce the need to rely on a welfare system in your retirement years. And you don’t have to search alone for that plan: Your financial advisor can help you weigh your plan options and build an appropriate investment strategy once you choose a plan. And your accountant can calculate the potential tax savings this new retirement plan will generate.

So which plan is right for you? The first option you should consider is an IRA or a Roth IRA. Both offer tax advantaged growth, but in different ways: The IRA grows tax deferred, meaning your contributions are tax deductible but you won’t owe taxes on your savings until you start making withdrawals. Contributions to a Roth IRA are made after taxes, but you won’t owe any taxes when you take withdrawals.

Anyone can contribute to an IRA, but not everyone is allowed to make tax deductible contributions. For instance, if you already have a retirement plan in place, your contributions likely won’t be deductible. But if you have a retirement plan, you may still be able to contribute to a Roth IRA, which bases eligibility on income levels. (In 2018, the Roth IRA income eligibility limits phase out between $120,000 and $135,000 for single filers and eligibility limits phase out between $189,000 and $199,000 for married couples filing jointly.) For 2018, individuals can make annual contributions of up to $5,500 to both IRAs and Roth IRAs. If you’re over 50, your limit rises to $6,500 a year thanks to an extra $1,000 in catch-up contributions allowed for older individuals.

If you want to save more than an IRA or Roth IRA allows, consider a formal retirement plan such as a Simple IRA, SEP IRA or an Individual 401(k).

  • The Simple IRA is easy to establish. You can contribute a maximum of $12,500 annually if you are under 50 and $15,500 if you are over 50. In addition, you can contribute 3% of any W-2 wages. One note: The deadline to establish a Simple IRA is October 31, so don’t wait until the end of the year to open an account.
  • The next option is a SEP IRA. The annual limit for a SEP IRA is $55,000 or 25% of self-employment income if you are paying yourself a salary. The deadline to establish the SEP IRA is your tax filing deadline plus extensions. Therefore, you can put off starting a SEP IRA until well into 2019. For that reason we call it “the procrastinator’s retirement plan.”
  • The third option is the Individual 401(k). The annual contribution limit for this 401(k) is $55,000 if you are under 50 and $61,000 if you are over 50. The 401(k) can either be a traditional 401(k) (contributions are pre-tax, but withdrawals are taxed) or a Roth 401(k) (contributions are after tax money, but withdrawals are tax free).
  • There are no income limits for the Roth 401(k). The deferral is made up of two parts. The first part is the employee portion, which has a limit of $18,500 if you are under 50 and $24,500 if you are over 50. This deferral can either go into the 401(k), the Roth 401(k) or a combination of both. The remainder is the employer contribution, which has a limit of 25% of compensation.
  • The deadline to establish this plan is December 31 of this year. The employer contributions can be contributed later but employee deferrals need to be in as soon as they are withheld from your paycheck. Therefore, you can’t wait like the SEP.

How do these plans stack up? Let’s look at an example. Say you are self-employed and you pay yourself $50,000 in W-2 salary. Here are the limits for each plan.

Retirement Plan summary.PNG

What’s the verdict? The 401(k) is the big winner. The Simple IRA is a good option for those with lower incomes, while the SEP is good for those who tend to procrastinate.

If these contribution limits are not enough, then you might want to consider a Defined Benefit Plan, which can be paired with a 401(k). Contribution limits to Defined Benefit plans are based on actuarial calculations, but you could be able to contribute $200,000 or more each year.

As always, it is important to coordinate with your financial professional to see what plan is best for you. Please contact me if you’d like to explore your retirement savings options.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice

What to Do After Inheriting an IRA

Here is a nice article provided by Kimberly Lankford of Kiplinger:

 

By Kimberly Lankford, Contributing Editor   

 

September 1, 2017

 

Heirs must begin taking withdrawals once they inherit an IRA, but how they choose to make those distributions can have a big impact on their account balance over time. 

 

Q. My mother just passed away at the age of 60. She has $110,000 in a traditional IRA, and my sister and I are the beneficiaries. The bank said it will have to open an IRA account for each of us and then distribute the $110,000 equally between us. Do we need to keep the money with that bank or can we transfer it to another brokerage firm? Also, when do we need to withdraw the money? I'm 39 years old.

 

A. Because you and your sister are non-spouse beneficiaries, the bank will open inherited IRAs for each of you and transfer the money directly into the two accounts (the options are different for spouses who are beneficiaries and can roll the money into their own IRAs). You can keep the IRA at that bank or transfer it to a different IRA custodian, such as a brokerage firm or mutual fund company. Money from an inherited IRA must be directly transferred from the old account to the new one, so check with the new administrator to find out what steps you need to take to do this. "The new IRA custodian must be willing to accept inherited IRAs," says Christine Russell, senior manager of retirement at TD Ameritrade. You may also have to complete special paperwork for the transfer.

 

As a non-spouse beneficiary, you have two options for taking the money: You can withdraw all the funds from the inherited IRA within five years, or you can start taking periodic payments by December 31 of the year following the year of your mother's death.

 

Given that you are only 39, you're probably better off taking periodic payments. That's because your required withdrawals will be smaller under this method, so you'll have more money left in the account to grow tax-deferred for years. 

 

The periodic payments for inherited IRAs are similar to required minimum distributions for IRA holders over age 70½, but they use a different life-expectancy table to calculate the annual withdrawals (Table 1 single life-expectancy table, in Appendix B of IRS Publication 590-B, Individual Retirement Arrangements).

 

Make sure the IRA custodian knows you want the periodic payment option. Otherwise, its IRA documents may require you to withdraw the money within five years, says Russell.

 

Whatever option you choose for withdrawals, the distributions will be taxable, except for any from nondeductible contributions. With an inherited IRA, though, you won't have a 10% penalty for early withdrawals before age 59½.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Marriage and Roth IRA Contributions

Here is a nice article by Kimberly Lankford of Kiplinger:

 

By Kimberly Lankford, Contributing Editor   

 

August 25, 2017

 

Newlyweds can suddenly become ineligible for Roth IRAs once their incomes are combined, although couples may still invest in them indirectly. 

 

Q. I'm getting married next month, and when we add up my income and my wife's, we'll earn more than the limit to contribute to a Roth IRA. But I'm below the income limit now, so can I contribute to a Roth before the wedding?

 

A. No. If you're married as of December 31, you're considered to be married for the full year for tax purposes -- no matter what the wedding date. That means you'll file your taxes as married – either jointly or separately -- for 2017. You'll also be subject to the joint income limits for Roth contributions for the full year. If you’re married filing jointly and your combined adjusted gross income is less than $186,000, then you both can contribute the full $5,500 to a Roth for the year (or $6,500 if you're age 50 or older). Once your joint income reaches $186,000 to $196,000, then you both can make reduced contributions. You can't contribute to a Roth at all if your joint income is more than $196,000. See IRS Publication 590-A, Individual Retirement Arrangements, for a worksheet to calculate your modified adjusted gross income for the Roth limits.

 

And you can't get around the Roth limits by filing taxes separately. The income limit is just $10,000 for married people filing separately if you lived with your spouse at any time during the year.

 

If you earn too much to contribute to a Roth, you can both put money instead in nondeductible traditional IRAs for 2017 and then convert them to Roths.. But you could be taxed on a portion of the rollover if you have any other money in traditional IRAs (the tax-free portion of the conversion is based on the ratio of your nondeductible contributions to the total balance in all of your traditional IRAs). See Converting Nondeductible IRA Contributions to a Roth for more information. 

 

If you had already contributed to the Roth for the year and now your income disqualifies you, you would still have time to undo the contribution. Otherwise, you would have to pay a 6% penalty on excess contributions. You could take the contributions (and any earnings on them) out of the Roth before the tax-filing deadline, or you could have your IRA administrator switch your 2017 Roth contributions (plus all earnings on that money) into a traditional IRA. If you made contributions to the Roth in earlier years, the administrator should calculate how much of the earnings in the account should be attributed to the 2017 contribution. You can keep the money from previous years' contributions in the account.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

10 Worst Jobs for the Future

Here is a nice article provided by Stacy Rapacon of Kiplinger:

 

By Stacy Rapacon, Online Editor | July 2017

 

The labor market is steadily improving, with unemployment at its lowest level in a decade, but some fields continue to experience a downward slide. For example, about 1.7 million manufacturing jobs were lost between January 2007 and January 2017 as some positions have been displaced by advancing technologies and others have moved overseas. And while it's true that manufacturing employment has rebounded a bit since the Great Recession ended, Josh Wright of labor market research firm Economic Modeling Specialists International (EMSI) says many of those added positions call for technical expertise that low-skilled manufacturing workers lack.

To help today's job seekers better grasp the realities of the labor market and avoid some dying professions, we analyzed 785 popular occupations, considering their pay rates, growth potential over the next decade and educational requirements. The bottom of our rankings are littered with jobs that pay little at present and are expected to shed positions in the future. Take a look at 10 of the worst jobs for the future, along with our suggestions for alternate career paths that offer better growth and pay prospects. 

Unless otherwise noted, all employment data was provided by Economic Modeling Specialists International, a labor market research firm owned by CareerBuilder. EMSI collects data from more than 90 federal, state and private sources, including the U.S. Bureau of Labor Statistics. The total number of jobs listed for each occupation is for 2016. Projected ten-year job growth figures represent the percentage change in the total number of jobs in an occupation between 2016 and 2026. Annual earnings were calculated by multiplying median hourly earnings by 2,080, the standard number of hours worked in a year by a full-time employee.

 

Textile Machine Worker

 

•Total number of jobs: 22,173

•Projected job growth, 2016-2026: -21.2% (All jobs: 8.6%)

•Median annual salary: $27,227 (All jobs: $43,233)

•Typical education: High school diploma or equivalent

 

The manufacturing industry is a tale of two job markets. Yes, there's a decline in many production jobs in the U.S., including among setters, operators and tenders of textile knitting and weaving machines (the specific occupation for which the above tabular data applies). But while such low-skill roles are dwindling, demand for certain skilled manufacturing jobs has been on the upswing in recent years. "The positions that have remained are a little more technical, they pay a little better, and we continue to hear employers saying they have a hard time finding manufacturing talent," says EMSI's Joshua Wright.

 

Alternate Career

Machinists have a particularly promising future, with their ranks growing by 11.9% by 2026. These workers use machine tools such as lathes, milling machines and grinders to make items ranging from simple bolts to titanium bone screws for orthopedic implants. While you can still get this gig with just a high school diploma, you also need specialized training, which you can receive on the job or through an apprenticeship program, vocational school or community or technical college. Machinists earn a median salary of $40,502 a year.

 

Photo Processor

 

•Total number of jobs: 23,853

•Projected job growth, 2016-2026: -19.7%

•Median annual salary: $27,324

•Typical education: High school diploma or equivalent

 

The rapid proliferation of digital photos and photo sharing through cyberspace are cutting demand for print pictures and the people who operate the big machines that process them. Plus, when the whim arises, advancing technology has allowed people to print their own photos at home.

 

Alternate Career

Photographers are seeing a better career outlook than photo processors. Over the next decade, the profession is expected to grow 12.0% to 155,286 jobs by 2026. Median earnings is currently about $30,690 a year. Portrait and commercial photographers (who may work for corporations to create advertisements) are likely to experience the greatest demand.

 

Furniture Finisher

 

•Total number of jobs: 20,113

•Projected job growth, 2016-2026: -0.7%

•Median annual salary: $28,698

•Typical education: High school diploma or equivalent

 

These woodworkers shape, finish and refinish damaged and worn furniture—a service less called for when online marketplaces and discount retailers are bringing down prices for new pieces. Furniture finishers also contribute to the production of new wooden products, handling the staining, sealing and topcoating at the end of the process. But as with many other manufacturing jobs, automation has reduced the number of workers needed to perform these tasks and limited the growth prospects for this occupation.

 

Alternate Career

If you can apply your handiwork more broadly, becoming a carpenter may offer a sturdier future. While this position suffered high employment losses over the past decade, which included the housing bust, it's expected to add more than 25,830 jobs, or 2.5%, by 2026. This job also pays more, with a median salary of $37,717 a year. 

 

Radio or TV Announcer

 

•Total number of jobs: 33,202

•Projected job growth, 2016-2026: -10.0%

•Median annual salary: $32,383

•Typical education: Bachelor's degree

 

More radio disc jockeys, talk show hosts and podcasters are under threat of being silenced. Consolidation of radio and television stations, as well as the increased use of syndicated programming, limit the need for these kinds of workers. Plus, streaming music services offer fierce competition to radio stations and their workers. On the upside, online radio stations may provide new opportunities for announcers.

 

Alternate Career

If you're committed to this career track, consider addressing even smaller audiences and becoming a party DJ or emcee. These other types of announcers make up a small field of just 17,326 workers currently, but are expected to grow their ranks 6.0% by 2026. They typically earn slightly less with a median $32,177 a year, but only require a high school diploma to get started.

 

Floral Designer

 

•Total number of jobs: 53,463

•Projected job growth, 2016-2026: -5.0%

•Median annual salary: $23,938

•Typical education: High school diploma or equivalent

 

For floral designers, the bloom has fallen off the rose. After a surge of new flower-shop openings in the 1980s and '90s, their numbers have fallen dramatically. Blame budget-conscious consumers, who are opting to buy loose, fresh-cut flowers from grocery stores instead of elaborate bouquets and arrangements from florists. Plus, the rise of the Internet has allowed some florists to operate more efficiently and reduce the number of brick-and-mortar shops.

 

Alternate Career

If your heart is set on a floral-focused future, apply for a position at a grocery store, where employment of floral designers is expected to grow 5%. Otherwise, consider casting your eye for arrangement from flowers to furniture. Positions for interior designers are expected to grow 6.0% by 2026. To take this path, you'll need additional education—usually a bachelor's degree—and possibly a license or certification, depending on your state and specialty. But you may also expect to earn more; interior designers have a median pay of more than $44,885 a year. If further education isn't in the cards for you, consider being a merchandise displayer. These positions are projected to increase by 12.1% this decade, typically pay about $26,557 a year and require just a high school education.

 

Gaming Cashier

 

•Total number of jobs: 23,111

•Projected job growth, 2016-2026: 2.0%

•Median annual salary: $22,970

•Typical education: High school diploma or equivalent

 

Casinos are becoming more popular and widespread as more states are allowing and building new gaming establishments. Unfortunately, many of those casinos are increasingly finding ways to use less cash in their operations. For example, many slot machines now generate tickets instead of spitting out coins. This change will contribute to the declining need for gaming cashiers in the future.

 

Alternate Career

Other gaming occupations have much better odds for success. Dealers and cage workers are expected to grow 8.7% and 12.0%, respectively, over the next decade. Unfortunately, and ironically, dealers don't rake in much cash; their median salary is just $19,552 a year. Cage workers do better with $25,854 annually. Another option is to apply your cashier skills outside the casinos. Opportunities are much more plentiful: Currently 3.6 million cashiers are working across the nation, and 6.2% more are expected to be added to the workforce by 2026. The pay isn't great with a median $19,337 a year, but no formal education is required either.

 

Legislator

 

•Total number of jobs: 56,514

•Projected job growth, 2016-2026: 1.5%

•Median annual salary: $20,500

•Typical education: Bachelor's degree

 

It's an ugly time to be in politics. The number of positions for local, state and federal legislators rarely changes, so competition can be fierce as we've all seen on the national stage. And despite what you might think about fat-cat politicos, government paychecks for the majority of elected officials are actually pretty light. On the bright side, opportunities to enter the field arise with every election, and pay for the top 10% in the field goes up to above $95,000 a year.

 

Alternate Career

You can still affect change by pursuing a career as a social and community service manager. (And you can always get back into politics from this career path; it worked for Barack Obama.) Like many of our best jobs for the future, this occupation benefits from the aging population. As boomers increasingly lean on social services, such as adult day care and meal-delivery programs, managers of such businesses will be in greater demand. In fact, the number of these managers is expected to grow 15.7% by 2026 from 149,920 currently. Plus, the median salary is much more generous at $62,349 a year. You need at least a bachelor's degree in social work, urban studies, public administration or a related field to get started. But reaching these managerial heights typically also requires relevant work experience of five years or more. And some employers prefer applicants with master's degrees.

 

Metal and Plastic Machine Operator

 

•Total number of jobs: 34,413

•Projected job growth, 2016-2026: -10.3%

•Median annual salary: $30,620

•Typical education: High school diploma or equivalent

 

Although metal and plastic are durable materials, the U.S. labor market for people who work with them is not quite as stable. Many of the old metal- and plastic-production jobs are now being done more efficiently by machines or more affordably abroad. Lower-skill positions that involve manually setting and operating machines—including plating and coating machines, to which the above tabular data applies—are becoming increasingly scarce.

 

Alternate Career

While less-skilled manufacturing jobs are declining, more high-tech positions within the industry are on the rise. Indeed, the number of operators of computer-controlled metal and plastic machines and programmers of computer numerically controlled metal and plastic machines are expected to grow by more than 17.5% each. The median salary is also better: The operators have a median salary of about $37,024 a year, and the programmers earn a median of more than $48,984 a year.

 

Door-to-Door Salesperson

 

•Total number of jobs: 77,462

•Projected job growth, 2016-2026: -20.3%

•Median annual salary: $21,486

•Typical education: No formal education

 

Better dramatized by sci-fi writer Philip K. Dick than playwright Arthur Miller, the death of the traveling salesman can be chalked up to advancing technology. When businesses are able to contact millions of customers online with the press of a button, going door-to-door has become a very inefficient way to push products. And the people once charged with doing so are being replaced by solicitations broadcast via websites, e-mail and social media outlets.

 

Alternate Career

Your sales skills are better applied in less-nomadic positions. For example, the number of insurance sales agents is expected to increase 10.6% to 651,215 by 2026. The median pay is about $47,872 a year, and the entry-level education requirement is just a high school diploma, though you will also need to get a license to sell insurance in the state where you work.

 

Print Binding and Finishing Worker

 

•Total number of jobs: 52,323

•Projected job growth, 2016-2026: -10.2%

•Median annual salary: $30,264

•Typical education: High school diploma or equivalent

 

Print may not be dead, but it seems to require much less upkeep these days. Far fewer workers are needed to bind and finish books and other publications than were employed a decade ago. The relatively good news is that the rate of loss seems to be tapering off now that the number of workers is so low. 

 

Alternate Career

Putting your finishing touch on another career path may be a safer move. Certain assemblers and fabricators—who put together finished products, such as engines, computers and toys, and the parts that go into them—have better prospects. Aircraft structure, surfaces, rigging and systems assemblers are projected to boost their ranks by 1.2% over the next decade. You need just a high school diploma to get started, and median earnings are $48,984 a year.

 

2016 Worst Job Rankings

•Thinkstock

•Door-to-Door Sales Worker

•Textile Machine Worker

•Floral Designer

•Sewing Machine Operator

•Print Binding and Finishing Worker

•Tailor

•Upholsterer

•Craft Artist

•Photo Processor

•Metal and Plastic Plating and Coating Machine Operator

 

Kiplinger updates many of its rankings annually. Above is last year's list of 10 of the worst jobs for the future. Keep in mind that ranking methodologies can change from year to year based on data available at the time of publishing, differences in how the data was gathered, changes in data providers and tweaks to the formulas used to narrow the pool of candidates.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

10 Small Towns With Big Millionaire Populations

Here is a nice article provided by Dan Burrows of Kiplinger:

 

By Dan Burrows, Contributing Writer | June 2017

 

Just 5.5% of the households in the U.S. qualify as bona fide millionaires. That means they have investable assets of $1 million or more, excluding the value of real estate, employer-sponsored retirement plans and business partnerships. Not surprisingly, the majority of these 6.8 million wealthy households can be found in big cities such as New York, Los Angeles and Chicago.

 

But it turns out some millionaires prefer to avoid the hustle and bustle of major metropolises. Phoenix Marketing International, a firm that tracks the affluent market, ranked 915 urban areas, both large and small, based on the percentage of millionaire households in each. Here are the 10 smallest cities and towns boasting the highest concentration of millionaires in the U.S.

 

Estimates of millionaire households provided by Phoenix Marketing International. This list is limited to so-called micropolitan statistical areas, which are defined as having at least one urban cluster with more than 10,000 residents but less than 50,000. Investable assets include education/custodial accounts, individually owned retirement accounts, stocks, options, bonds, mutual funds, managed accounts, hedge funds, structured products, ETFs, cash accounts, annuities, and cash value life insurance policies. Data on household incomes and home values are from the U.S. Census Bureau.

 

10. Gardnerville Ranchos, Nev.

 

Millionaire Households: 1,445

Total Households: 20,566

Concentration of Millionaires: 7.0%

Median Income for All Households: $58,535 (U.S.: $53,889)

Median Home Value: $272,000 (U.S.: $178,600)

 

Gardnerville Ranchos is a favorite hiding place for millionaires because of its proximity to Lake Tahoe, which has long been a getaway for the rich and famous. With everything from ski resorts to beaches, the Lake Tahoe area offers year-round activities for well-heeled tourists and full-time residents alike. Adding to the appeal for residents, Nevada is one of the most tax-friendly states in the U.S. thanks to no state income tax and modest property taxes. Carson City, capital of the Silver State, is just 20 miles to the north of Gardnerville Ranchos, and high-rollers can reach Reno’s casinos in an hour.

 

9. Truckee-Grass Valley, Calif.

 

Millionaire Households: 3,007

Total Households: 42,612

Concentration of Millionaires: 7.1%

Median Income for All Households: $54,177 

Median Home Value: $383,400

 

You’ll find the Truckee-Grass Valley area on the California side of Lake Tahoe, with Truckee proper situated near the shore of the famed lake itself and Grass Valley sitting farther to the west. Multiple bodies of water including Donner Lake, where the Donner Party met its gruesome demise, make the entire area a recreational haven for water sports. And the long, snowy winters are perfect for the numerous ski resorts in the vicinity of Truckee and Grass Valley. Another appealing aspect of the area for millionaires: It’s a straight shot down Interstate 80 to reach Sacramento, the state capital, and San Francisco. Less appealing: California ranks as the single worst state in the U.S. for taxes.

 

8. Concord, N.H.

 

Millionaire Households: 4,136

Total Households: 57,844

Concentration of Millionaires: 7.2%

Median Income for All Households: $68,566 

Median Home Value: $220,400

 

The New Hampshire state capital is home to a horde of state, county, local and federal agencies -- and the law firms and professional agencies that support them. Concord is also a major distribution, industrial and transportation hub. Tourism is a key contributor to the local economy, thanks to the nearby New Hampshire International Speedway, as is the state's increasing emergence as a center of high-tech manufacturing. Concord also benefits from being within easy reach of Manchester, the state's largest city, which is only about 15 miles to the south. And well-off residents seeking a break from quaint New England living can drive to Boston in less than 90 minutes. 

 

7. Vineyard Haven, Mass.

 

Millionaire Households: 589

Total Households: 7,995

Concentration of Millionaires: 7.4%

Median Income for All Households: $64,222 

Median Home Value: $660,800 

 

No surprise here. Vineyard Haven is a town on Martha's Vineyard. This island off the coast of Cape Cod is one of the most desirable summer vacations spots in the Northeast and has long been a favorite of the rich, the famous and the powerful. Indeed, former presidents Bill Clinton and Barack Obama have summered there. Jacqueline Kennedy Onassis long maintained a home on the island. Naturally, this tony locale is not easy on the wallet, as evidenced by the exorbitant real estate prices. It also can get a bit crowded. Martha's Vineyard has 15,000 or so year-round residents, but the population swells to more than 115,000 during peak summer months.

 

6. Easton, Md.

 

Millionaire Households: 1,190

Total Households: 16,006

Concentration of Millionaires: 7.4%

Median Income for All Households: $58,228

Median Home Value: $319,500

 

Tiny Easton, on the Eastern Shore of Chesapeake Bay, prides itself on its out-of-the-way feel, with country farms mixing with lavish waterfront estates. It has long been a retreat for the well-to-do of the Mid-Atlantic seeking antiques shops and solitude. Easton's proximity to the beach, abundance of parks and good schools make for an idyllic small-town experience for residents. At the same time, the town offers easy access to several major cities. It's only 30 minutes from Annapolis, the state capital, and Washington, D.C., and Baltimore can be reached by car in about 90 minutes (traffic willing). Maryland has the most millionaires per capita of any state in the U.S., according to Phoenix Marketing International.

 

5. Fredericksburg, Texas

 

Millionaire Households: 837

Total Households: 11,244

Concentration of Millionaires: 7.4%

Median Income for All Households: $54,859

Median Home Value: $238,300

 

It's not hard to understand the allure of Fredericksburg, since it's smack-dab in the middle of Texas Hill Country. This beautiful region of the Lone Star State has plenty to offer for both outdoorsy types and aesthetes alike. Residents can explore a landscape of rolling hills, spring-fed rivers and lakes, and vast fields of wildflowers. But they can also partake in fine dining, wine tasting, concerts and art shows. A good example that combines the two, while giving a nod to the area's rich history, is the LBJ Ranch Tour and Wine Tasting. (To be clear, LBJ stands for Lyndon Baines Johnson, 36th president of the U.S., not LeBron James.) Fredericksburg also benefits from its proximity to Austin, capital of Texas and a hub for high-paying tech companies, about 90 minutes away.

 

4. Edwards, Colo.

 

Millionaire Households: 1,520

Total Households: 19,685

Concentration of Millionaires: 7.7%

Median Income for All Households: $72,214

Median Home Value: $419,400

 

You can sum up the appeal of Edwards in one word: skiing. The nearby world-class resorts of Vail and Beaver Creek draw big-spending skiers hoping to see and be seen all winter long. But the area offers much more than pricey lift tickets and celebrity spotting. Fly fishing, hiking and whitewater rafting draw folks to town in the summer months. Either way, high-end restaurants, plush lodges and spas are just some of the ways millionaires can pamper themselves. But it's Colorado's status as a tax-friendly state for both retirees and working residents that helps make Edwards a good deal for year-round living. It’s a good thing, too, considering the high price of homes in the area.

 

3. Williston, N.D.

 

Millionaire Households: 1,166

Total Households: 14,913

Concentration of Millionaires: 7.8%

Median Income for All Households: $88,013

Median Home Value: $201,400

 

The city of Williston expanded rapidly in the first half of this decade, according to the Census Bureau, driven by the explosion in shale oil drilling that once gave North Dakota the fastest-growing economy in the nation. Located in the center of the oil-rich Bakken Formation, Williston soon found itself the home of millionaires minted by the fracking revolution. But it doesn't look like it will be making more soon. North Dakota has seen oil booms and busts before, but the prolonged downturn in prices has turned cities like Williston upside-down. Wages are down and jobs have dried up. Some folks reportedly are just pulling up stakes, taking a bite out of the local tax base. If there's a silver lining for Williston's remaining millionaires, at least North Dakota is one of the nation's more tax-friendly states.

 

2. Torrington, Conn.

 

Millionaire Households: 5,995

Total Households: 74,673

Concentration of Millionaires: 8.0%

Median Income for All Households: $70,667

Median Home Value: $248,300

 

Torrington is the largest town in Litchfield County, which has long been a popular retreat for Manhattan's wealthy and chic looking for a remote, mountainous retreat. (It’s an in-state draw for all the millionaires from Stamford, too.) As Vogue magazine says of the area: "There’s something for everyone: art galleries, outdoor activities, shopping, great food. With its covered bridges, forests, and rivers, the scenery is gorgeous. In fact, every season challenges the next for which is more beautiful." Although Torrington might be hidden in the northwest corner of the state, millionaires can't escape Connecticut's onerous tax bite. Real estate taxes are among the highest in the country, and the state has not only a gift tax but also a luxury.

 

1. Juneau, Alaska

 

Millionaire Households: 1,109

Total Households: 12,986  

Concentration of Millionaires: 8.5% 

Median Income for All Households: $85,746

Median Home Value: $323,500

 

Like Anchorage, another Alaskan city with a high concentration of millionaires, everything is more expensive in Juneau. Chalk it up to the remote location of Alaska’s capital, which is tucked away in the southeast corner of the state hard against the Canadian border. Groceries alone cost one-third more than the U.S. national average, according to the Council for Community and Economic Research's Cost of Living Index. And while it helps to be a millionaire to live in Juneau, it's increasingly hard to become one. Much of Alaska's wealth is tied to the energy business, and a prolonged slump in oil prices is taking a toll. Indeed, Alaska is in the midst of its worst recession in three decades. On the plus side, Alaska is one of the most tax-friendly states in the union. Not only is there no state income tax, but the government actually pays residents an annual dividend.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

11 Satellite Cities Poised to Thrive in 2017

Here is a nice article provided by David Payne of Kiplinger:

 

By David Payne, Staff Economist | March 2017, Nick Mourtoupalas also contributed to this report. 

 

It’s been a slow climb back from the Great Recession for the nation’s major metropolitan areas. Yet job seekers often overlook the small and medium cities located near or relatively near the big hubs. As the big metro areas recover, these smaller “satellite” cities benefit from spreading regional business growth, while offering lower housing and commuter costs, putting less of a squeeze on employee salaries than more expensive, congested places a few hours away.

 

That can mean both abundant job opportunities and budget-friendly home prices for folks looking to relocate. Check out these 11 up-and-coming satellite cities where the job markets are hot but the cost of living won’t eat all of your paycheck. All of these cities’ job markets have been growing faster than the national average, most have lower jobless rates than the national average, and all are expected to continue to outperform economically this year.

 

St. George, Utah

 

Close by: Las Vegas (100 miles SW), Salt Lake City (300 miles NE)

Employment growth in 2016: 6.1% (national growth: 1.8%)

Latest unemployment rate (Dec. 2016): 3.2% (national rate: 4.7%)

Median home price: $345,000 in the city, up 10% from last year ($235K to $300K in the suburbs)

 

St. George has seen five consecutive years of 5%-plus job growth. Much of that has come in professional and business services, health care, retail, manufacturing and hospitality services. Three of its biggest employers are SkyWest Airlines, Dixie Regional Medical Center and Sunroc, a regional building supplies company. Retirees wary of Vegas find the warm winters in the Utah desert to their liking here. One of the most scenic natural wonders in the country, Zion National Park, is just a 45-minute drive to the east.

 

Bend/Redmond, Oregon

 

Close by: Portland (170 miles NW)

Metro population: 114,000

Employment growth in 2016: 5.3%

Unemployment rate: 4.4%

Median home price: $360,000, up 9% from last year

 

On the east-facing slopes of the Cascade mountains, these twin cities have enjoyed robust job growth four years running. The trend is expected to continue. Tourism and the hospitality industry are integral to this region’s economy. Retirees like the outdoor activities (the east side of the Cascades gets more sunny days than the west side). Major employers include St. Charles Medical Center; Keith Manufacturing, makers of storage and conveying systems; and Sunriver Resort, an upscale vacation destination. The area is also seeing strong job growth in professional and business services, health care, retail, construction and manufacturing.

 

Cleveland, Tennessee

 

Close by: Chattanooga (40 miles SW), Atlanta (120 miles SE)

Metro population: 56,000

Employment growth in 2016: 4.9%

Unemployment rate: 4.4%

Median home price: $165,000, up 10% from last year

 

Home of Lee University, this less-famous Cleveland is quietly benefiting from strong growth in jobs in professional and business services, health care, retail and hospitality. Major employers include Whirlpool (it has a premium kitchen-appliances division and distribution outlet here), Tennova Healthcare and Amazon.com. Its 800 acres of industrial parks include manufacturing facilities and outlets for Volkswagen, Duracell, Mars and Bayer. It helps that Cleveland, with its views of the Great Smoky Mountains, is also in a state with no income tax.

 

Prescott/Prescott Valley, Arizona

 

Close by: Phoenix (100 miles S)

Metro population: 82,000

Employment growth in 2016: 4.6%

Unemployment rate: 4.2%

Median home price: $321,000, up 9% from last year

 

Prescott is a popular retirement and tourist alternative to the state capital. The area is cooler than Phoenix because its elevation is 4,000 feet higher, and the air is cleaner outside of the Phoenix basin. It is experiencing rapid job growth, driven by population growth. The biggest gains are in professional and business services, hospitality, health care and retail. Major employers include Yavapai Regional Medical Center; a Lockheed Martin training center; Superior Industries, which manufactures equipment for crushing, washing and conveying bulk materials; and Sturm, Ruger & Co., a firearms manufacturer which makes pistols here. Prescott is also home to Embry-Riddle Aeronautical University.

 

Savannah, Georgia

 

Close by: Charleston, S.C. (120 miles NE), Jacksonville, Fla. (170 miles S)

Metro population: 179,000

Employment growth in 2016: 4.0%

Unemployment rate: 4.9%

Median home price: $195,000, up 6% from last year

 

Gateway to the Atlantic Ocean just south of the South Carolina border, Savannah is not only a historic city with antebellum charm, but the fourth-busiest port in the United States. It saw a big jump in professional and business services jobs in 2016, along with strong growth in health care, retail and hospitality. The port authority is currently dredging the harbor to accommodate the biggest cargo ships, a project that will be completed in 2020. That means even more freight entering and leaving this already humming city. Major employers include Gulfstream Aerospace, Memorial Health, St. Joseph’s/Candler hospitals, Marine Terminals Corp. and SSA Cooper, a marine cargo handling outfit. Ft. Stewart/Hunter Army Airfield also anchors the local economy.

 

Reno/Sparks, Nevada

 

Close by: Sacramento, Calif. (130 miles SW), San Francisco (220 miles SW)

Metro population: 334,000

Employment growth in 2016: 4.0%

Unemployment rate: 4.2%

Median home price: $305,000, up 9% from last year

 

Near the California border and 20 miles from Lake Tahoe, Reno and Sparks benefit from tourism, hospitality and gambling. Business services, health care, construction and transportation are also major employers. The University of Nevada at Reno is the second-largest university in the state.

 

The area was jump-started economically when Tesla opened its gigafactory in January 2017, just a half-hour’s drive east of Reno. This is the largest facility in the world for making battery cells to power electric autos. It already employs more than 1,000 people. Tesla says it plans to add 1,000 more employees in early 2017, with a goal of a 6,500-person workforce sometime in 2018. The venture has attracted ancillary businesses such as Panasonic, which has plans to add 2,000 workers at its Reno operations in 2017. Other major employers include Renown Regional Medical Center, Peppermill Resort Spa Casino and International Game Technologies, a manufacturer of slot machines.

 

Athens, Georgia

 

Close by: Atlanta (75 miles W)

Metro population: 123,000

Employment growth in 2016: 4.0%

Unemployment rate: 4.8%

Median home price: $270,000; higher closer to the University of Georgia campus

 

The Athens area (Clarke County and Oconee County) is heating up as an alternative to big-city Atlanta, with the University of Georgia serving as both an incubator and hub of business development. Professional and business services and the hospitality industry are major drivers of job growth. Lots of construction jobs, too: Three new hotels have been added to the downtown area along with large student housing developments. Retirees, especially, are attracted to the educational pursuits and sports attractions that come with a college town, as well as major health care facilities. Other big employers include Athens Regional Medical Center, Caterpillar and Pilgrim’s Pride, which operates a local food processing plant.

 

College Station/Bryan, Texas

 

Close by: Houston (100 miles SE), Austin (110 miles W), Dallas (180 miles N)

Metro population: 187,000

Employment growth in 2016: 3.9%

Unemployment rate: 3.4%

Median home price: $230,000, up 6% from last year

 

Located virtually equidistant from Houston and Austin, College Station is home to Texas A&M University. It and neighboring Bryan are following the path of Austin (the Lone Star State’s capital, with its University of Texas campus) as the next up-and-coming regional center. Texas A&M has expanded enrollment from 40,000 to 60,000 in the past five years. Having a thriving university results in strong growth in jobs in professional and business services, health care, retail, hospitality and other services. The A&M Health Science Center and the veterinary school sponsor a facility for manufacturing vaccines, including 1 million inoculation doses for the avian flu. A bio corridor is developing around this and a GlaxoSmithKline facility. Sanderson Farms, one of the largest chicken suppliers in the United States, has a major processing facility just outside Bryan.

 

Salem, Oregon

 

Close by: Portland (50 miles N)

Metro population: 234,000

Employment growth in 2016: 3.5%

Unemployment rate: 4.3%

Median home price: $240,000, up 6% from last year

 

Salem is the capital of the Beaver State and a thriving satellite city in the fast-growing Willamette Valley. The area has become an affordable alternative to Portland, 90 minutes away during rush hour. Construction is also going strong, and 2016 saw a big jump in professional and business services jobs. Commercial real estate is booked solid. The Career Technical Education Center, a public-private partnership, has significantly improved graduation rates for its high school seniors.

 

Marion County is the largest food producer in the state, and a center for agricultural science and research. County voters approved a bond issue in 2014 to fund an agricultural extension service sponsored by Oregon State University. Other large employers include Salem Hospital; Willamette University; Norpac, a food processing company; Spirit Mountain Casino; and T-Mobile.

 

Boise, Idaho

 

Close by: Nothing really, but a satellite city nonetheless

Metro population: 324,000

Employment growth in 2016: 3.4%

Unemployment rate: 3.4%

Median home price: $245,000, up 10% from last year

 

Located in the southwest corner of the Gem State, Boise benefits as a regional alternative to Seattle, Portland, or Salt Lake City, all a six- to eight-hour drive away (but hey, this is the West, where folks are used to driving long distances).

 

Boise is the state capital, largest city in the state, and home of Boise State University, with its iconic blue-turfed football stadium. It’s also one of the least expensive large metros in the wide-open spaces of the West. Local industries that are hiring briskly include health care, construction, manufacturing and finance. Boise is big on both agribusiness and semiconductors, and has many tech start-ups. Clearwater Analytics, a local start-up, now has a 10-story building downtown. The great outdoors is always close by with the Rocky Mountains and ski resorts. Big employers include St. Luke’s health systems, Saint Alphonsus Regional Medical Center, Micron Technology, HP and the state government.

 

Spokane, Washington

 

Close by: Seattle (280 miles W)

Metro population: 304,000

Employment growth in 2016: 3.0%

Unemployment rate: 6.4%

Median home price: $195,000, up 11% from last year

 

Western Washington has Seattle; eastern Washington has Spokane, the number-two metro area in size but a more affordable alternative for newcomers to the Evergreen State. It is the home of Gonzaga University and is seeing robust job gains in professional and business services, health care, construction and transportation. Major employers include Providence Sacred Heart Medical Center & Children’s Hospital, Deaconess Medical Center and the 92nd Air Refueling Wing at Fairchild Air Force Base.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.